China to improve rare earth regulations under WTO rules

Reuters News
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Posted: Jul 06, 2011 7:29 AM
China to improve rare earth regulations under WTO rules

BEIJING (Reuters) - China will reform its export of rare earths based in part on World Trade Organization rules, state media reported on Wednesday, a day after the global trade governing body ruled against China on export quotas on raw materials.

The Ministry of Commerce will study and take steps forward in rare earth export management "according to relevant laws and World Trade Organization rules," China's vice commerce minister Zhong Shan said, according to the official Xinhua news agency.

The WTO ruled on Tuesday that China broke international law when it curbed exports of coveted raw materials such as bauxite, coke and magnesium used in the production of steel, electronics and medicines.

That ruling, initiated by a complaint filed by the United States, the European Union and Mexico in 2009, was seen as a landmark that could have implications for the legality of China's rare earth export quotas.

China produces 97 percent of the world's supplies of rare earths, a group of 17 minerals used in electronics and defense and renewable energy industries.

Insisting that its high output levels are unsustainable and damaging to the environment, the central government slashed rare earth export quotas by 35 percent for the first half of 2011, building on previous quota cuts.

The decision has choked off global supplies, boosted prices and angered China's trading partners.

"Rare earths are a non-renewable and important strategic resource," Zhong said at a rare earth export conference in the city of Baotou, the country's largest rare earth industrial base in the China's vast northern region of Inner Mongolia.

"Strengthening and perfecting rare earth exports has great significance in protecting the natural resource environment and promoting the restructuring of the industry," he said, noting that the ministry would "synchronize" the regulation of the exports with domestic production and consumption.

The U.S. and EU's top trade negotiators as well as industry groups said the raw materials ruling should serve to pressure China and other states into dropping such restrictions on rare earths.

China said it regretted the WTO's finding on raw materials and is widely expected to appeal, a prospect that will probably delay any new complaints on rare earth until the strength of China's claim becomes clearer.

EU Trade Commissioner Karel De Gucht vowed to address the issue during a visit to Beijing next week, but said the EU, United States and Mexico could still opt for legal action if China failed to cooperate.

(Reporting by Michael Martina; Editing by Sugita Katyal)