China blocks panel requests by the U.S. on “rare earths” dispute

China, at the Dispute Settlement Body (DSB) meeting on 10 July 2012, said it was not in a position to accept the establishment of a panel requested by the United States, the European Union and Japan regarding its measures related to the exportation of rare earths, tungsten and molybdenum.

The United States, the European Union and Japan told the DSB they were, respectively, requesting the establishment of a panel as their consultations with China had failed to resolve their concerns.
Late last year, Congressman Don Manzullo (R-IL), Chairman of the House Foreign Affairs Subcommittee on Asia & the Pacific, held a hearing to highlight the fact that China controls 97 percent of the rare earths market and has been limiting exports.

As reported in LM, this was said to cause “skyrocketing” costs of the minerals to the detriment of manufacturers in the U.S. and other countries.

The United States said because of China’s position as a leading global producer of these materials, China’s export restraint measures gave China the ability to significantly affect global supply and pricing. It said that the materials at issue are key inputs in the production of a wide range of important products, such as hybrid car batteries, wind turbines, automobiles and advanced electronics. It added that the export restraints appeared to be inconsistent with the General Agreement on Tariffs and Trade (GATT) 1994 and China’s Protocol of Accession.

The European Union said China’s export restrictions significantly distort the market and create competitive advantages for the Chinese manufacturing industry to the detriment of foreign competitors. It said these policies put pressure on foreign producers to move their operations and technologies to China. It recognized environmental protection and sustainable resource management as legitimate aims but strongly believed that export restrictions are not the appropriate tools to promote these aims.

Japan said that the materials at issue are used by its industry in the production of various final products, such as catalysts and polishing media. China’s export restrictions have caused a short supply of the materials in the international market and significant price differences between China’s domestic market and export market. It said that Japanese manufacturers have faced difficulty in purchasing the materials from China, putting them at a disadvantageous position with their Chinese counterparts.

China said that its policies in question are aimed at protecting natural resources and achieving sustainable economic development. It said it was puzzled by the complainants’ initiation of the panel process as it has no intention of protecting its domestic industry through means that would distort trade. It added that at the present meeting, it was not in a position to accept the establishment of a panel.

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