WTO: China’s export restrictions on rare earths violate trade rules

The World Trade Organization on Wednesday said that China’s restrictions on the exports of rare earths -- raw materials commonly used in the manufacturing of electronics -- violate trade rules.

China had argued that the restrictions, which included export duties and quotas, were in place to conserve exhaustible natural resources, but other countries disagreed.

The United States two years ago complained to the World Trade Organization about the restrictions, arguing that they artificially raised the prices of rare earths for other countries and gave preferable pricing to Chinese manufacturers. The European Union and Japan also joined the complaint.

In its ruling, the WTO said that China’s “export quotas were designed to achieve industrial policy goals rather than conservation” and said that the conservation argument made by China does not apply to “measures to control the international market for a natural resource.”

Rare earths, despite their name, are not especially rare. They are a group of 17 naturally occurring metals that include tungsten and molybdenum. They are used in various manufactured products, including hybrid cars, televisions, cellphones and weapons.

China is the global leader in production of rare earths, accounting for about 97% of their production in 2011, according to a Congressional Research Service paper.

China now has 60 days to adopt or appeal the WTO ruling. If it’s adopted, the U.S., the European Union and Japan would then be allowed to retaliate trade-wise against China if it does not comply with the ruling.