WTO panel sides with Japan, U.S., EU over China’s duties on rare earths

JIJI

A World Trade Organization dispute settlement panel has basically upheld a joint claim by Japan, the United States and the European Union that China’s export duties on rare earth metals violate WTO rules, it was learned Friday.

This is the first time Japan has lodged a direct complaint against China with the global trade watchdog.

In a preliminary decision presented to the parties concerned, the WTO panel said the export duties on the rare earth metals tungsten and molybdenum run counter to an agreement to abolish export duties, in principle, that China adopted in 2001 when it joined the WTO, sources said.

The panel is expected to issue its final report after hearing the opinions of the parties concerned as early as mid-November. The parties are allowed to file an appeal with the Appellate Body, the WTO’s top court, if they are dissatisfied by the report.

The Chinese side has insisted that overproduction of rare earths will likely to lead to environmental destruction and hinder sustainable development of the industry. It has also said the export duties and rare earth export volume quotas are reasonable from the perspective of protecting the environment and natural resources.

After unsuccessful efforts to resolve the issue via bilateral talks with China, Japan, the United States and the EU jointly filed a complaint with the WTO in March 2012.

In January 2012, China lost a WTO dispute with the United States, the EU and Mexico over its export controls on minerals including rare metals. China has since taken corrective measures, such as abolition of export duties.

Japan depends on China for rare earth metals, which are crucial to high-tech products, such as electronic gadgets and motors used in hybrid vehicles.

But Japan is developing alternative materials and moving to obtain new suppliers, since international prices for rare earths have soared due to China’s export controls and the virtual halt of rare earth exports to Japan after a Chinese fishing boat and Japan Coast Guard ships bumped off the Senkaku Islands in the East China Sea in 2010, resulting in the skipper’s arrest.