Tags: US | china | rare | Earth

U.S., EU, Japan Challenge China at WTO Over Rare-Earth Curbs

Tuesday, 13 March 2012 09:34 AM

The U.S., the European Union and Japan complained at the World Trade Organization today over Chinese limits on exports of rare earths that are critical to the world’s high-tech and so-called green industries.

China produces at least 90 percent of the world’s rare earths, 17 chemically similar metallic elements used in Boeing Co. helicopter blades, Nokia Oyj cell phones, Toyota Motor Corp. hybrid cars and wind turbines. China says it curbed output and exports to conserve resources and protect the environment.

“China’s restrictions on rare earths and other products violate international trade rules and must be removed,” EU Trade Commissioner Karel De Gucht said today in an e-mailed statement. “These measures hurt our producers and consumers in the EU and across the world, including manufacturers of pioneering hi-tech and ‘green’ business applications.”

Rare earths became a political and legislative issue after China moved to limit domestic output and slash export quotas in July 2010 by 40 percent, souring ties with major users including the U.S. and Japan, where buyers cut usage after prices soared in the first half of 2011. China said on Dec. 28 it was leaving the 2012 overseas sales caps virtually unchanged.

Volatile Prices

The U.S. Energy Department said in January that limited supplies of five rare-earth minerals — dysprosium, terbium, europium, neodymium and yttrium — pose a threat to increasing use of clean-energy technologies such as wind turbines and solar panels. While prices of rare earths fell in the second half of 2011, they remain volatile, leading some companies to search for ways to consider reducing reliance on the minerals, the Energy Department said.

China’s policy regarding rare earths complies with WTO rules, and allegations the country monopolizes the trade are “groundless,” Liu Weimin, a Chinese Foreign Ministry spokesman, said at a briefing today. The fact that China has about a third of the world’s rare-earth resources and produces about 90 percent of supply isn’t sustainable given the environmental damage that results from mining the metals, Liu said.

“Despite such huge environmental pressure China has been taking measures to maintain rare earth exports,” Liu said. “China will continue to supply rare earths to the international market.”

Raw-Materials Ruling

In a similar case, the WTO ruled in July that Chinese limits on raw-materials exports broke global rules and gave domestic companies an unfair advantage. U.S. Trade Representative Ron Kirk said at the time that the finding is “a significant victory for manufacturers and workers in the U.S. and the rest of the world” as the duties “caused massive distortions and harmful disruptions in supply chains throughout the global marketplace.”

Morgan Stanley said on March 5 that demand for rare earths may rebound following a 25 percent slump in prices this year, benefiting producers of the metals such as Molycorp Inc., which owns the largest rare-earth deposit outside of China, located near Mountain Pass, California.

The raw materials covered by the complaint filed today are various forms of rare-earth elements, molybdenum and tungsten. The 17 chemical elements include lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium and lutetium as well as scandium and yttrium.

The request for consultations is the first step in the case. Under WTO rules, the four governments must now hold talks for at least two months in a bid to resolve the dispute. If the talks fail, the complaining governments can ask WTO judges to rule.

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Tuesday, 13 March 2012 09:34 AM
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