China ready to defend its rare earth polices at WTO

China is ready to respond to possible complaints over its rare earth export restrictions at the World Trade Organization, a Ministry of Commerce (MOC) official said Wednesday.

The remarks followed a WTO decision on Monday to uphold a ruling against China's export duties and export quotas on nine raw materials, which do not include rare earths.

However, concerns were raised that the latest ruling might lead to a similar case against the country's rare earth export policies, which have triggered contention between China and some of its trade partners.

"Regarding WTO members' possible similar actions over China's rare earth policies, we're ready to respond at any time in line with WTO rules and procedures," Li Chenggang, head of the MOC's legal and treaty department, told Xinhua in an exclusive interview.

The WTO's ruling in the raw material case "might have some reference value" for a possible rare earth case as the export management models of those resources are quite similar, Li said.

The United States, European Union and Mexico filed complaints to the WTO in 2009, claiming China's export restraints over nine raw materials, including zinc, coke and magnesium, pushed global prices high and benefited the country's domestic industry.

China has argued that those restraints were aimed at protecting the environment and exhaustible resources.

Li stressed that the WTO allows members to take necessary measures to protect resources and environment but only considers it fair if export restraints are accompanied by simultaneous restrictions over domestic production or consumption.

He noted that China's management of rare earths no longer merely features trade restrictions but relies more on regulation of domestic production and consumption.

China's rare earth sales account for nearly 90 percent of the global total but its reserves only account for about one-third of the world's total. Decades of excessive exploitation have resulted in serious environmental damage.

While imposing export quotas, China has suspended the issuance of new licenses for prospecting and mining, adopted production caps and stringent environmental standards and launched crackdowns on illegal mining activities.

A group of 17 elements, rare earths are metals widely used in high-tech products ranging from flat-screen televisions to lasers and hybrid cars.

China set the 2012 rare earth export quota at basically the same level of 2011. Its rare earth exports totaled 14,750 tons during the first 11 months of 2011, accounting for only 49 percent of the total quota.

Li said the Chinese government has also been adjusting its restrictive policies over other raw materials and resources to make them not only meet domestic demand but also comply with WTO rules in recent years.

In the raw material case, the WTO did not deny the legitimacy of China's policy target of protection exhaustible resources and environment, but only judged if specific measures were appropriate, so "it's not saying relative measures can no longer be used," he noted.

The WTO first ruled against China last July and China filed an appeal two months later, requesting part of the ruling be canceled.

The WTO will decide whether to adopt the final ruling within 30 days, Li said.

He said China did not lose the case completely, as the WTO ruling does not support a challenge of the complainants against the country's overall export management measures on raw materials and resources.

He called on China's future policy making in this area to take more consideration of international influence, integrate trade measures with domestic industrial policies and attach importance to compliance with rules.

Beijing-based WTO expert Tu Xinquan echoed the view, saying China should draw a lesson from the case and turn to domestic industrial regulation and environmental standards to manage resources export.

"It's easier for China's export policies to incur disputes nowadays as China's economy expands and global demand for raw materials and resources rises," he told Xinhua.