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China rare earth trade limits break rules: WTO

GENEVA -- The World Trade Organization (WTO) on Thursday upheld its ruling that China had violated global trade rules by restricting exports of rare earths, used in hi-tech goods like mobile phones and televisions.

Beijing had appealed a decision by a WTO panel in March that its use of export duties, quotas and control over who could export the metals had skewed global commerce.

That panel of independent trade and legal experts backed a complaint lodged with the WTO by the United States, the European Union and Japan in 2012.

They claim China was limiting exports in a bid to drive up prices and gain market advantage for domestic producers with cheaper access to the raw materials.

China accounts for 95 percent of global production of rare earths, a term covering 18 metals vital for the production of smartphones, hybrid car batteries, wind turbines, steel and low-energy light bulbs.

The country is home to 23 percent of global reserves of such metals, and has argued its restrictions on exports were aimed at conserving natural resources and reducing pollution caused by mining.

The WTO's Appellate Body said in a report on Thursday that “China has not demonstrated that the export quotas that China applies to various forms of rare earths, tungsten and molybdenum are justified,” and called on Beijing to fall in line with international trade rules.

The Appellate Body's decisions are considered final and, in principle, WTO member states are obliged to follow its rulings.

China hit back, saying it “strongly regrets” the decision, arguing that it “did not give up its rights in its accession to the WTO to assert a defence to its export duties based on the need to protect its environment.”

Beijing said it would “carefully assess the ruling, continue to improve its management on resource-consuming products in a WTO-consistent manner” and “take future steps consistent with the (WTO dispute settlement system) requirements.”

EU Trade Commissioner Karel de Gucht said the ruling was “another milestone in the EU's efforts to ensure fair access to much-needed raw materials for its industries.”

“This ruling sends a clear signal that export restrictions cannot be used to protect or promote domestic industries at the expense of foreign competitors. I now look forward to China swiftly bringing its export regime in line with international rules, as it did with other raw materials under the previous WTO ruling,” he said.

Japanese Foreign Minister Fumio Kishida said his country “highly values” the WTO ruling.

“Japan finds it deeply significant that the (WTO) Appellate Body makes clear that export restraints imposed by China — which would favor the Chinese domestic industry in the use of exhaustible natural resources — cannot be justified under the guise of protecting the environment or conserving natural resources,” he said in a statement.

“Japan calls for China to faithfully and promptly bring its WTO inconsistent measures into conformity with its WTO obligations,” he added.

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