US, EU and Japan challenge China in trade spat

[March 13, 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 technology components.

China produces almost all of the world's supply of rare earths but has limited exports in recent years. That worried countries with large technology industries as rare earths are used in a variety of sectors to make hard drives, car parts, electronics, fiber optics -- and every smartphone in use today.

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.

The three separate but coordinated filings with the WTO formally request dispute settlement consultation, which is the first step in a WTO complaint. If no resolution is found, the dispute can be transmitted to a WTO Panel for a ruling.

Earlier Tuesday, anticipating the complaints, China defended curbs on production of rare earths as an environmental measure.

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. China has about 30 percent of rare earths deposits but accounts for 97 percent of the world's production.

China needs to limit environmental damage and conserve scarce resources, said a Chinese foreign ministry spokesman, Liu Weimin.

"We think the policy is in line with WTO rules," Liu said at a briefing.

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 Chain has made no move to comply with the earlier ruling.

[Associated Press; By DON MELVIN]

Joe McDonald in Beijing contributed to this report. Don Melvin can be reached at http://twitter.com/Don_Melvin.

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