US, EU, Japan challenge China over minerals trade

[March 15, 2012]  BRUSSELS (AP) -- The United States, the European Union and Japan filed complaints Tuesday with the World Trade Organization charging that China is limiting its export of rare earths, minerals that are vital to the production of high-tech goods.

China accounts for more than 90 percent of global production of 17 rare earth minerals that are used to make goods including hybrid cars, weapons, flat-screen TVs, mobile phones, mercury-vapor lights, and camera lenses.

China has cut export quotas while it tries to build up its own industry to manufacture lightweight magnets and other products made with rare earths. The government also cites environmental concerns and the need to preserve scare resources.

U.S. industry officials suggest it is an unfair trade practice, against rules established by the WTO, a group that includes China as a member.

EU Trade Commissioner Karel De Gucht said China's export quotas and export duties give Chinese companies an unfair competitive advantage and must be removed.

"These measures hurt our producers and consumers in the EU and across the world," De Gucht said.

President Barack Obama announced the filing of the U.S. complaint at the White House. His administration says it is part a broader effort to crack down on unfair Chinese trading practices.

"If China would simply let the market work on its own, we'd have no objection," Obama said. "But their policies currently are preventing that from happening. And they go against the very rules that China agreed to follow."

Senior administration officials said Beijing's export restrictions give Chinese companies an advantage by giving them access to more rare earths at a cheaper price, while forcing U.S. companies to manage with a smaller, more costly supply.

China's Commerce Ministry defended the curbs Tuesday as an environmental measure but promised to abide by the WTO dispute-settlement process.

"The Chinese policy objective is to achieve sustainable development in order to protect resources and the environment, and this is not a trade-distorting way of protecting domestic industries," said a ministry statement.

China has about 30 percent of global rare earths deposits. The United States, Canada, Australia and other countries also have rare earths but most mining stopped in the 1990s as lower-cost Chinese ores came on the market.

The three separate but coordinated filings with the WTO formally request dispute settlement consultation, the first step in a WTO complaint. If no resolution is found after 60 days, the dispute can be transmitted to a WTO Panel for a ruling. At the end of the process, depending on the outcome, sanctions against China are possible.

In addition to rare earths, the complaints cover tungsten, a very hard metal, and molybdenum, a metallic element used in making different types of steel as well as in other industries.

Global manufacturers that depend on Chinese supplies were alarmed by Beijing's decision in 2009 to limit exports while it built up an industry to produce lightweight magnets and other goods that use them.

The complaints filed Tuesday follow an earlier EU challenge to China at the WTO on restrictions on other raw materials. Earlier this year, the WTO ruled that export restrictions on those other material were incompatible with the rules of the global trade organization, of which China is a member.

But EU officials said China has made no move to comply with the earlier ruling.

[Associated Press; By DON MELVIN]

Joe McDonald in Beijing and Julie Pace in Washington contributed to this report.

Follow Don Melvin on Twitter at http://twitter.com/Don_Melvin.

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