The World Trade Organization backed the U.S. in a dispute with China, agreeing Wednesday that limits on exports of so-called rare-earth elements used to make goods including hybrid-car batteries and wind turbines violate trade rules.
A dispute-settlement panel at the Geneva-based trade arbiter determined that China, the world’s largest producer of the minerals, didn’t adequately justify imposing export duties and quotas on the goods, which include the elements tungsten and molybdenum.
China’s export limits “have been putting American manufacturers at a disadvantage and preventing full and fair competition,” said U.S. Trade Representative Michael Froman.
The case is the latest dispute in a trade rift between China and the U.S., the world’s largest economies. During President Barack Obama’s administration, the nations have sparred over trade in goods and services including autos, poultry, clean-energy manufacturing, tires and credit-card payments.
Wednesday’s ruling may aid companies including Molycorp Inc., owner of the largest rare earth deposit outside China, and Ucore Rare Metals Inc. of Canada, which is developing a mine for the minerals in Alaska.
China has 60 days to adopt the decision or appeal under WTO rules. The nation “is currently assessing the panel report and will follow the WTO dispute settlement procedures to settle this dispute,” according to an emailed statement from China’s Ministry of Commerce.
The head of the ministry’s treaty and law department said that in the face of increasing pressure to conserve resources and protect the environment, China has been bolstering its regulations of natural resources, and will continue in a way that complies with trade rules, according to the statement.
The WTO decision follows a 2011 ruling in which the trade arbiter also sided with the U.S. in determining that China’s export limits on other raw materials used in steel and chemical production, such as bauxite, magnesium and zinc, broke trade law.
The U.S., the 28-nation European Union and Japan in 2012 filed complaints with the WTO, saying that China’s restrictions on exports of rare -earth minerals - a group of 17 chemically similar elements used to make electronics, autos, helicopter blades and other goods - disrupted trade flows and caused global prices to jump, in some cases as much as three times what Chinese companies pay.
U.S. users of the elements are responsible for about $300 billion in annual economic output, according to U.S. trade officials. Tungsten and molybdenum are used in steel production.
Among major users are U.S. steel manufacturers including United States Steel Corp. of Pittsburgh and Nucor Corp. of Charlotte, N.C. Companies including W.R. Grace & Co. of Columbia, Md., use the minerals to make oil-refining catalysts, and Molycorp, of Greenwood Village, Colo., makes magnets used by the auto industry.
China, which produces more than 90 percent of the world’s rare-earth minerals, in January said it would promote six companies including Aluminum Corp. of China, Baogang Group and China Minmetals Corp. to lead acquisitions in the rare-earth sector. The government is trying to discourage illegal production and consolidate the industry.
In the WTO case, China said duties on the goods were legal, since they were necessary to combat pollution caused by the mining. The Beijing government also said its export quotas and other trading restrictions were needed to conserve natural resources.
The WTO panel didn’t agree with those justifications.
“It found that China’s export quotas were designed to achieve industrial policy goals rather than conservation,” according to a summary of the findings posted on the WTO’s website.
Information for this article was contributed by Michelle Yun of Bloomberg News.
Business, Pages 25 on 03/27/2014