Rare earths policy defended

China Tuesday defended its policy on exports of rare earths, as the US, Japan and the EU launched a new trade complaint against Beijing over the key materials at the World Trade Organization (WTO).

"For the sake of environmental and resources protection and sustainable development, China carries out management policies on the exploitation, production and export of rare earths. We believe such measures comply with WTO rules," foreign ministry spokesman Liu Weimin told reporters.

China contributes more than 90 percent of global output of the 17 rare earth metals, but its own deposits only account for 36.4 percent of the world's total reserve of 100 million tons.

"Despite huge environmental pressure, China's exports of rare earths have been stable. The nation will manage rare earths based on WTO rules, and hopes other countries can shoulder the responsibility for supplies and can find alternative resources," Liu said.

The WTO Tuesday confirmed with AFP that the EU, the US and Japan had laid a complaint against China's export quota on the minerals.

EU trade chief Karel De Gucht said China's management of rare earths and other products "violates international trade rules and must be removed."

"These measures hurt our producers and consumers in the EU and across the world, including manufacturers of pioneering high-tech and 'green' business applications," De Gucht said.

US Trade Representative Ron Kirk told AFP that Beijing's "harmful policies artificially increase prices for the inputs (of rare earths) outside of China while lowering prices in China," which creates "significant advantages" for Chinese companies.

China would have 10 days to respond to a WTO complaint and would have to hold talks with the US, the EU and Japan within 60 days.

If an agreement cannot be reached within that time, Washington and its partners could request that a formal WTO panel investigate Chinese practices.

Zhao Zhongxiu, dean of the School of International Trade and Economics under the University of International Business and Economics (UIBE), told the Global Times that the WTO rules allow countries to restrict exports to protect its natural resources and environment.

Tu Xinquan, an associate director of the China Institute of WTO Studies under the UIBE, noted that China can defend its quota system on this basis, but cautioned that a WTO ruling on a similar issue earlier this year may have a negative impact on the case.

On January 30, the WTO rejected China's appeal over a ruling that curbs on exports of nine raw materials, including coke, zinc and bauxite, had broken the trade body's rules and given Chinese manufacturers an unfair edge over competitors. Beijing has not yet announced how it intends to comply with the January ruling.

Zhao suggested that if the dispute over rare earths cannot be solved through negotiations, it will take another two years for the WTO to reach a verdict.

"By that time, China will have managed to rationalize the scale of domestic production and consumption of rare earths by curbing small or illegal mines and rectifying chaotic mining. These measures will keep the export volume at a reasonable level," Zhao said.

Tu agreed, adding that China is managing the industry through taxation and consolidations, rather than export restrictions.

Miao Wei, Minister of Industry and Information Technology, said Sunday that the rare earths export quota this year would be 30,184 tons, the same as in 2011.

"Tougher regulations and a halt to illegal exploration meant rare earths output declined last year and prices rose, leading to a sharp fall in consumption by foreign companies."

"It is totally groundless to blame China for controlling rare earth exports. The fact is that many foreign firms are cutting their usage," Miao said, adding that the nation will establish two or three large rare earth exploration enterprises by consolidating companies in the sector.

Meanwhile, analysts said the latest complaint suggested that US President Barack Obama is toughening his stance on China trade ahead of November's presidential election.

Obama, facing fierce pressure from Republican opponents, has created a trade enforcement unit, the Interagency Trade Enforcement Center (ITEC), to more aggressively challenge "unfair" trade violations by nations.

ITEC, which is expected to be up and running in the coming months, will have China as its primary focus, Reuters reported.

Getting tough on China is one way Obama can begin to buttress relations with labor unions and blue-collar workers who objected to his championing of a series of bilateral trade deals last year, the Wall Street Journal commented.