China loses WTO appeal on restricting raw materials exports

The World Trade Organization has affirmed an earlier WTO ruling that China’s export duties and export quotas for raw materials used by the steel, aluminum, automotive and chemicals industries are unfair, Bloomberg Businessweek reported.

On July 5, 2011, the WTO ruled that China’s export restrictions on nine raw materials broke WTO rules as they gave Chinese manufacturers an unfair advantage over foreign competitors by keeping prices for the materials cheaper in China, Bloomberg Businessweek reported.

The complaint about China’s export restrictions on bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc was filed in 2009 by the United States, Mexico and the European Union, the Wall Street Journal reported.

China had appealed the decision, arguing that the export restrictions were needed to conserve some natural resources and limit the environmental impact of producing others, according to the Wall Street Journal. However, the WTO appeals panel noted that China hadn’t placed similar restrictions on the consumption or production of the materials domestically.

According to the Wall Street Journal:

The appeals panel didn't uphold all of the initial rulings that favored the US, Europe and Mexico, reversing findings on China's export-licensing requirements, minimum export-price requirements and some administrative and fee matters. But the main ruling – that the export duties and quotas violate WTO rules – survived with the appeals panel rejecting China's argument the restrictions were justified for environmental or supply-shortage concerns.

US Trade Representative Ron Kirk called the WTO decision a “tremendous victory” that “ensures that core manufacturing industries in this country can get the materials they need to produce and compete on a level playing field,” according to Bloomberg Businessweek.

Following today’s appeals panel ruling, EU Trade Commissioner Karel De Gucht urged China to lift export restrictions on 17 rare earth elements as well as the nine materials specified in the case, the Financial Times reported.

“China now must comply by removing these export restrictions swiftly and furthermore, I expect China to bring its overall export regime – including for rare earths – in line with WTO rules,” De Gucht said, according to the Financial Times.

China currently produces more than 90 percent of the world’s rare earth materials, which are used in solar panels, wind turbines and mobile phones, the Financial Times reported.

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