Rare earths policy ‘in line with WTO’

Protecting the environment and the efficient management of resources were the factors that shaped China’s rare earths policy in accordance with global trade rules, the Ministry of Commerce said.

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The ministry was responding on Tuesday to the US filing a case, along with Japan and the EU, at the World Trade Organization (WTO) against China’s export controls over rare earths, which are critical for the manufacturing of high-tech products.

US action against China’s rare earths export curbs, and the recent setting up in Washington of a trade enforcement unit that analysts believe targets China, will sour economic relations, the ministry said.

“We knew it (the case) would come some day. Now it has come but China has long been ready for it,” Li Chenggang, head of the ministry’s department of treaty and law, told China Daily.

“The WTO has repeatedly recognized, and agreed, on the legitimacy of China’s goal of protecting the environment and preventing a drain of rare earths resources through export management,” he said.

At a news briefing on Tuesday, Liu Weimin, Ministry of Foreign Affairs spokesman, also said that there were no grounds to blame China.

“China will continue to manage exports and make sure a certain volume of rare earths are available for export according to the WTO rules.”

China produces about 97 percent of the world’s rare earths but domestic reserves have been depleted sharply over the last 50 years.

A dispute with Tokyo in 2010, after Japan illegally detained a Chinese trawler captain, disrupted exports to Japan.

China has recently lowered export quotas for rare earths, which caused the main buyers, the US, the EU and Japan, to pressure China to loosen controls.

But pressure will not work, Li said.

China has no intention of changing export policy and demand, both domestic and foreign, is treated equally and is based on WTO rules, Li said.

“China will continue to strengthen and improve export management and strictly abide by WTO rules and regulations.”

The cases filed at the WTO come hot on the heels of the US establishing an interagency trade enforcement unit to see whether its major trade partners, including China, play by, what it terms, the rules.

The unit, set up at a cost of $26 million and employing up to 60 people, will further fuel trade friction between the world’s top two economies, experts said. The timing of the case was also called into question.

“We cannot exclude the possibility that the US lodged the appeal on rare earths against China for political reasons. China is a major target during the presidential election,” Li said.

Although he believed that a trade war was highly unlikely, friction was bound to increase, he said.

Experts said the US, the EU and Japan, have long been expected to file a WTO case against China.

Kim Van der Borght, professor of International Economic Law at the University of Brussels, said the case had peculiar characteristics.

This is the first time that the EU, US and Japan have jointly filed and the case is peculiar in another way too, he said. Generally, the WTO is about market opportunities, the possibility to sell goods or services in a particular market.

The WTO is not normally involved in forcing a country to sell something, he said.

Daniel Fiott, research fellow at the Madariaga, the College of Europe Foundation in Brussels, said that China enforced the quotas to ensure there was no environmental damage caused due to excessive mining and to protect dwindling reserves.

This dispute is not only for trade, but for strategy, for the US, EU and Japan’s strategy, he said.

In January, endorsing a previous finding, the WTO’s appellate body declared that export limitations by China on nine raw materials, including zinc, coke and magnesium, through quotas and tariffs broke WTO rules.

Officials from the Ministry of Commerce told China Daily after the ruling that some countries will soon lodge cases against China.

“I have no idea about the final result of the case. I can neither be optimistic nor pessimistic,” Li said.

Sang Baichuan, dean of the Institute of International Business at the University of International Business and Economics, said: “It is not surprising that the US lodged the complaint, but China has to face the possibility of losing.”

It usually takes at least two to three years for a WTO case to be completed.

No grounds

Last year, China’s export quota was 30,184 tons, down 40 percent from 2009. This year’s quota will be in line with last year’s according to the Ministry of Commerce.

Zhang Anwen, deputy secretary-general of the Chinese Society of Rare Earths, said that the US move is “too aggressive and has no grounds”.