Ruling Sought On Rare Earths

The U.S., Japan, and the European Union have asked the World Trade Organization (WTO) to establish a dispute settlement panel to investigate and issue a ruling on claims that China is unfairly restricting exports of rare-earth materials, as well as tungsten and molybdenum.

The action follows a complaint the three economic powers brought to the Geneva-based trade arbiter in March. The three charge that China’s use of export duties, quotas, and other restraints on these materials violates WTO rules (C&EN, March 19, page 8).

China accounts for 97% of the world’s production of rare-earth minerals, a group of 17 chemical elements essential for making a wide array of high-tech products, including hybrid car batteries, wind turbines, cell phones, and other advanced electronics.

China also accounts for 91% of global output of tungsten, a metal used in electrical and military applications, and 36% of world production of molybdenum, a metal mainly used in the steel industry.

“It is vital that U.S. workers and manufacturers obtain the fair and equal access to raw materials like rare earths that China specifically agreed to when it joined the WTO” in 2001, says U.S. Trade Representative Ron Kirk.

The parties held formal talks in late April but were unable to agree on a solution. “We regret that we are left with no other choice but to solve this through litigation,” says EU Trade Commissioner Karel De Gucht.

WTO officials have scheduled a July 10 meeting to consider the request for a dispute settlement panel. A final decision could take up to two years.

Critics say that limiting export of the materials gives China the ability to boost prices by curtailing the global supply. Kirk calls the restraints “part of a troubling industrial policy aimed at providing substantial competitive advantages for Chinese manufacturers at the expense of foreign manufacturers.”

China counters that the export restrictions are necessary to protect its environment from excessive mining and conserve an exhaustible natural resource. “We have no intention of protecting our domestic industry through trade-distorting measures,” says Ministry of Commerce spokesman Shen Danyang. China, he adds, has always abided by WTO rules.