US, EU and Japan escalate WTO case against China on rare earths

27 June 2012 19:13  [Source: ICIS news]

WASHINGTON (ICIS)--The US on Wednesday escalated its complaint before the World Trade Organization (WTO) that China is unfairly restricting supply of rare earth elements, asking that the group convene a dispute settlement panel to resolve the issue.

US Trade Representative (USTR) Ron Kirk said that the EU and Japan also have filed parallel demands for a WTO judgement against Beijing over its export restrictions on rare earth elements (REEs).

The formal request for a full dispute settlement panel comes some three months after the US, EU and Japan first asked the WTO to oversee consultations with China on the matter in hopes of resolving it without a full dispute resolution proceeding.

But Kirk said that talks held 25-26 April between the US, EU and Japan on one side and Beijing on the other failed to make any progress, setting up the demand for the dispute panel.

The 17 chemical and mineral substances known as rare earths are crucial to refining, petrochemicals production and other industries, such as manufacture of weapons and space systems, lasers and fibre optic communications, to name but a few applications.

Despite the name, rare earth elements are not actually rare – most of them are found in almost any soil around the world – but extremely rare are those areas in which these substances can be found in concentrations that make mining them commercially feasible. China supplies about 95% of rare earth elements worldwide.

In announcing the decision to pursue the rare earths complaint to a full WTO dispute panel, Kirk said that “it is vital that US 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”.

China was admitted to the WTO in late 2001 over the objections of many in the US, and especially among those in Congress, who argued that China’s Communist-dominated, command economy was not eligible for membership and warned that Beijing would not honour WTO rules.

Citing other US complaints against various Beijing trading restrictions, Kirk said that “once again, despite China’s characterisations, its export restraint measures on rare earths, tungsten and molybdenum appear to be part of a troubling industrial policy aimed at providing substantial competitive advantages for Chinese manufacturers at the expense of foreign manufactures”.

In all, China restricts the export of more than 100 materials covered under WTO tariff codes, the USTR office said.

The escalated US and multinational complaint against China on the rare earths issue follows by six months an earlier WTO ruling against Beijing in favour of the US.

In that ruling, China was found to be restricting the flow of other raw materials essential to various US manufacturing sectors.

A WTO dispute settlement panel would be expected to deliver its ruling within six to eight months.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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