China broke trade law on metals WTO concludes

The World Trade Organization (WTO) has made a ruling that China broke international rules by restricting the exports of certain metals, including those critical to renewable energy technologies.

China's response to the ruling has been less than enthusiastic with a Xinhua editorial entitled "A regrettable WTO ruling". China's Ministry of Commerce (MOC) responded to the decision by saying it is evaluating the report and will "properly follow up" according to WTO procedures.

The case, which dates back to 2009, was brought by the US was supported by the EU and Mexico after China imposed quotas, saying it had to conserve resources. The raw materials subject to the export restraints included forms of bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc.

The main complaint was that said this left non-Chinese manufacturers with shortages of the necessary metals, driving prices higher in global markets and provided the Chinese domestic industry with a significant advantage by way of a sufficient supply, and lower and more stable prices for the raw materials.

The MOC response said it "feels regret" that its main defence against the allegations were not justified pursuant to the general exceptions relating to the conservation of exhaustible natural resources and the protection of human health. Indeed the WTO's statement directly commented on China's environmental protection claims by pointing out that it could show no restrictions at all in either production or consumption enforced on domestic companies.

It went on to say: "Upon its accession to the WTO, China undertook to eliminate all export duties (taxes) except for a number of products listed in an Annex to its Protocol of Accession. In this Protocol, China also committed not to apply export quotas (restrictions on the amount that can be exported).

"The Panel also considered that even if China were able to rely on certain exceptions available in the WTO rules to justify its export duties, it had not complied with the requirements of those exceptions."

Interestingly the complainants did not include Japan, which faced a suspension in its supplies of rare earth metals from China in October last year, due to another diplomatic spat between the two nations.

During the 1990s and for much of the past decade, China was able to produce rare earths more cheaply than other countries, leading to the closure of mines elsewhere, notably in Australia and the US.