clock menu more-arrow no yes

Filed under:

China's restrictions on rare earth exports violate trade law, WTO rules

New, 64 comments

The World Trade Organization today ruled that China's restrictions on rare earth exports are in violation of international trade law. For years, the country has maintained a stranglehold on the worldwide supply of rare earth elements— crucial to the manufacturing of smartphones, TVs, and a wide array of other electronics. China provides over 90 percent of the world's rare earth shipments and has driven up prices by imposing costly tariffs and export quotas. China has long insisted these measures are necessary to conserve its natural resources and lessen the environmental damage that results from mining rare earths.

But critics maintain that China has built a monopoly around rare earths and used its influence to create an unfair advantage for domestic manufacturers. That's forced other countries to look elsewhere for the metals; last year, Japan discovered large deposits of rare earths within its own borders. A year earlier, it joined the US and European Union in filing a WTO complaint intended to break China's control over the market. They see today's decision — which concludes "the overall effect of the foreign and domestic restrictions is to encourage domestic extraction and secure preferential use of those materials by Chinese manufacturers" — as a major victory.

"China’s decision to promote its own industry and discriminate against US companies has caused US manufacturers to pay as much as three times more than what their Chinese competitors pay for the exact same rare earths," said Mike Froman, a US trade representative. "WTO rules prohibit this kind of discriminatory export restraint and this win today, along with our win two years ago in an earlier case, demonstrates that clearly," he said. China has 60 days to appeal the decision, which it is expected to do. But for now, the WTO panel has ruled that "China's trading rights restrictions breach its WTO obligations." Beijing could eventually face sanctions from the US, EU, and Japan as a result.