China responds to rare earth WTO complaint

China's Ministry of Commerce (MOC) said Tuesday that it will properly deal with a dispute settlement request on rare earth made by three major economies in accordance with World Trade Organization (WTO) rules.

The European Union, United States and Japan on Tuesday formally asked the WTO to settle a dispute with China over restrictions placed on exports of raw materials including rare earth elements.

The MOC confirmed in a statement posted on its website that it has received the request for dispute settlement.

"Previously, China has been in constant communication and contact with related countries about its export policy on raw material products, and has emphasized repeatedly that the policy aims to protect resources and the environment, and realize sustainable development," the statement said.

China has no intention of protecting domestic industries by distorting its foreign trade, it added.

"China will properly deal with the request for dispute settlement in accordance with the WTO's settlement procedures," the MOC said.

Earlier Tuesday, Minister of Industry and Information Technology Miao Wei told Xinhua that China is actively preparing to defend itself. "We would feel sorry for their decision to complain to the WTO," he said.

China has abundant reserves of rare earth metals, a group of 17 elements that are vital for manufacturing an array of high-tech products, including cell phones, wind turbines, electric car batteries and missiles.

The country has supplied more than 90 percent of rare earth products on the global market, but its reserves only account for about one-third of the world's total. Disorderly mining of rare earths has been blamed for environmental damage in rare-earth-rich regions across China.

In order to control environmental damage and protect resources, China has suspended the issuance of new licenses for rare earth prospecting and mining, imposed production caps and export quotas, and announced tougher environmental standards for rare earth production.

Miao stressed that China's rare earth export restriction is not against any specific country, nor is it a kind of trade protectionism. "Instead, the policy was drawn up out of concern for the environment and the sustainable use and development of resources."

Tu Xinquan, professor with the University of International Business and Economics, said the complaint led by the United States is understandable.

"The economy of the United States is experiencing faltering recovery, and meanwhile the country will hold a presidential election this year. The timing of the complaint has both economic and political considerations.

Liao Jinqiu, economist with Jiangxi University of Finance and Economics, said that environmental costs had not been included in the pricing of the commodities in the past years.

"The exploitation of rare earths should be further integrated, and a rare earth industry chain must be forged to ease the environmental pressure created by excessive extraction," Liao 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 argued that those restraints were aimed at protecting the environment and exhaustible resources.

As a rule, the WTO allows members to take necessary measures to protect resources and environment, and considers it fair if export restraints are accompanied by simultaneous restrictions over domestic production or consumption.