WTO rare-earth report slammed as unfair

China ought to further rectify the exploitation of its rare-earth elements and push for a restructuring of the industry through the levying of resource and environment taxes, analysts suggested, in response to a World Trade Organization (WTO) ruling against the country's export restrictions on the materials.

The WTO late on Wednesday announced China had broken rules by imposing export duties and quotas on rare-earth elements, tungsten and molybdenum as alleged in 2012 by the US, the EU and Japan.

"As a responsible WTO member, we respect relevant rules. But we regret that and we will continue our efforts to protect the environment and natural resources, and maintain our rights to argue," Zhang Anwen, vice secretary-general of the Chinese Society of Rare Earths, told the Global Times on Thursday.

China can appeal the ruling within 60 days.

Late on Wednesday China's Ministry of Commerce said it regretted the WTO announcement and is evaluating the report and adopting measures in accordance with WTO dispute settlement protocols.

Zhang said developed countries should feel gratitude toward China deep down even if they are reluctant to admit it publicly, considering China's sacrifice of its environment.

Over the years, China, with 23 percent of the world's rare earth reserves, supplied 90 percent of rare-earth elements to the international market and ensured development of the world's high-tech and emerging industries under massive environmental and resource pressure, Zhang noted.

"As such a contributor, China deserves understanding from importers on the world market," Zhang said.

Rare-earth elements are a group of highly valued rare minerals used to make high-tech products from iPhones to hybrid cars and airplane equipment. A remarkable disparity exists in the rare-earth value chain among its participants.

China has damaged and polluted its environment and gets a low price for its exports, Zhang said.

Foreign importers, however, obtained profits equal to dozens or even 100 times the cost from deep processing, Zhang said, noting it is unfair and unsustainable on China.

Industry insiders have reported mixed reactions toward the WTO report.

"The US, Japan and the EU formed a hunting party against China. They sued China in 2012 over the export of nine kinds of raw materials and this time they staged the same drama over rare earth," Wu Chenhui, a non-ferrous metal analyst with chinaiol.com, told the Global Times.

Wu said the environmental cost of rare-earth elements, such as pollution management and environmental rehabilitation during extraction and primary processing, are often overlooked.

Feng Jun, a senior consultant from the Shanghai WTO Affairs Consultation Center told the Global Times that China's potential appeal may have little chance of success. "The rules of the WTO are not in our favor."

However, there are plenty ways for China to protect its environment and exhaustible resources such as imposing a resource tax, Feng said.

"Indonesia for instance banned exports of raw materials out of the country in January. No one sues them," Feng said, urging the government to explore means permitted under WTO rules.

Zhang said despite the impact of the WTO report, governance of this industry will continue to prevent chaotic exploitation.

"We hope we can gain understanding from the international community, and establish a diversified, sustainable, mutually beneficial supply market of the rare-earth metals," Zhang said.

Due to the tariff, Chinese rare-earth export figures have dropped in recent years. At the same time, industry insiders said that rare-earth smuggling in the country is still widespread due to poor supervision.

"We fear that lifting export tariffs and quotas will let the industry return to problems. But on the other hand, the tariff also kills the competitiveness of our goods on the global market," a manager of international trade at Gansu Rare Earth New Material Co, told the Global Times on Thursday on the condition of anonymity.

"This is fairly low for China," Lo said, adding that the average rate for the past few years had been about 24 percent. Last year, such investment grew 19.6 percent.

The NPC said retail sales will pick up 14.5 percent this year, compared with 13.1 percent in 2013. But Lo said the sector faces challenges.