WTO case launched on China

The European Union, the US and Japan formally asked the World Trade Organisation yesterday to settle a dispute with China over Beijing’s restriction on exports of raw materials, including rare earth elements critical to electronics makers.The dispute is one of several between Beijing and the other three economic powers, as Chinese industry remolds the world economic order. It is the first case to be jointly filed by the EU, US and Japan at the WTO, an EU official said.The process also comes in the middle of a US election year. President Barack Obama, a Democrat, is toughening his stance on Chinese trade practices amid criticism from his Republican rivals that his administration has not been strict enough with Beijing.US Trade Representative Ron Kirk said the case was part of a broader effort by the Obama administration to make sure China and other countries play by global trade rules.“America’s workers and manufacturers are being hurt in both established and budding industrial sectors by these policies. China continues to make its export restraints more restrictive, resulting in massive distortions and harmful disruptions in supply chains for these materials throughout the global marketplace,” Kirk said.EU trade chief Karel De Gucht said the three trading powers were making a dispute settlement request — the first step before filing a full trade case.“China’s restrictions on rare earths and other products violate international trade rules and must be removed,” De Gucht said.“These measures hurt our producers and consumers in the EU and across the world, including manufacturers of pioneering hi-tech and ‘green’ business applications.”Beijing said the export curbs were motivated by environmental concerns and said it would defend itself.Though dependent on the outside world for vast qualities of industrial inputs such as iron and coal, China accounts for about 97% of world output of the 17 rare earth metals. They are critical in producing items such as mobile phones, disk drives, wind turbines and electric cars.China’s Minister of Industry and Information Technology Miao Wei said the export quotas were not trade protectionism and did not target any specific country, the official Xinhua news agency reported.“We feel sorry for their decision to complain to the WTO,” Xinhua quoted Miao as saying. “In the meantime, we are actively preparing to defend ourselves.”The EU, US and Mexico won a similar rare earth case against China in January, but a European official close to the case said despite its victory China had raised export duties, export restrictions and prices.Foreign companies pay up to twice as much as Chinese firms for rare earth metals, the EU says.“These restrictions... benefit Chinese industry,” the official said. “Therefore they are against WTO rules.”The EU directly imports €350mn worth of rare earth from China each year, and also brings in products of far greater value containing rare earths from Japan and elsewhere. The damage done to European manufacturing runs into billions of euros, the official said because it was nearly impossible to diversify from Chinese supply.The US and the EU had long been expected to take China to the WTO over rare earth, but appeared to be awaiting the outcome of the earlier case.“Despite this recent ruling, China has not sent any signals that it would remove its wider export restrictions,” the EU said explaining the joint move.The earlier ruling left open a loophole for export quotas if they were imposed to limit environmental damage, so long as they were matched by domestic restrictions.China said its export policies stemmed from environmental concerns, but failed to prove its curbs helped conserve resources, cut pollution or improve public health in that case, the EU said.Trade friction between the EU and China has been growing.De Gucht said on a recent visit to Hong Kong that China needed to be sensitive to perceptions that its economy is a threat in Europe, even as EU-China trade has boomed to almost €400bn in 2010.EU complaints against Chinese dumping range from shoes to kitchenware and De Gucht has previously complained that China subsidises “nearly everything”.