China's export restrictions on raw materials illegal: WTO

5th July 2011, Comments 0 comments

The World Trade Organisation ruled Tuesday against China's export restrictions on raw materials, in a case that could have a bearing on Beijing's moves to tighten its grip on rare earths.

Both Washington and Brussels hailed the ruling, with the European Union urging China to halt its restrictions on rare earths, key minerals used in high-tech products.

The United States, the European Union and Mexico took China to the WTO in 2009, charging that export quotas and duties imposed by Beijing on some raw materials were illegal and against commitments that China made when it joined the world trade body.

These minerals include bauxite, coking coal, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus and zinc.

All are key inputs for numerous products in the steel, aluminium and chemical sectors and as China is a leading producer for these raw materials, any restrictions could lead to sharp spikes in world prices, they argued.

WTO arbitrators backed the complainants, ruling that China had failed to abide by its accession commitments when it imposed quotas and duties on these minerals.

They rejected Beijing's arguments of conservation concerns as China failed to prove that it imposed export restrictions in tandem with limits for domestic consumption of the raw materials.

In other words, China failed to demonstrate that its restrictions were not just targetted at foreign usage but also domestic use.

Tuesday's ruling came amid an international uproar over China's moves to tighten its grip over rare earths.

China has cited environmental concerns and domestic demand for slashing its exports and imposing higher taxes, leading to skyrocketing prices.

For the European Union, the WTO finding was a "clear verdict for open trade and fair access to raw materials.

"It sends a strong signal to refrain from imposing unfair restrictions to trade and takes us one step closer to a level playing field for raw materials," said Karel De Gucht, EU trade commissioner.

"I expect that China will now bring its export regime into line with international rules.

"Furthermore, in the light of this result, China should ensure free and fair access to rare earth supplies," he said.

In Washington, US Trade Representative Ron Kirk said the ruling was "an important confirmation of fundamental principles underlying the global trading system.

"All WTO members, whether developed or developing, need non-discriminatory access to raw material supplies in order to grow and thrive," he said.

China meanwhile expressed regret at the ruling and said that its measures are "in line with the objective of sustainable development promoted by the WTO and they help to induce the resource industry towards healthy development.

"China will adopt scientific administration on resource products in accordance with the WTO rules so as to maintain fair competition and promote sustainable development," Beijing said in a statement issued by its mission to the WTO.

© 2011 AFP

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