The US, EU and Japan are trying to get China to lift its stranglehold on rare Earth minterals via the WTO dispute settlement. However, China is proving cantankerous as it rejected the panel request by US, EU, and Japan on the “rare earths” dispute at the last WTO Dispute Settlement Body (DSB) meeting on July 10.
China has been blamed for monopolizing the “rare earth” mineral market as it holds approximately 30% of global reserves and produces 95% of the world’s supply. These minerals are vital for manufacturing high tech products such as hybrid car batteries, wind turbines, and smart phones. In March 2012 the United States, the European Union, and Japan brought a WTO case against China for placing export restrictions on more than 100 tariff lines that have dramatically increased prices of “rare earths.” The restrictions include export quotas and duties which only apply to foreign companies and not to domestic manufacturers.
After the failure to reach an outcome during the initial 60 day stage of consultations, the three disputing parties placed a panel request on the agenda for the July 10 meeting. The US, EU and Japan claim that China’s export restrictions on minerals such as tungsten and molybdenum give an unfair competitive advantage to Chinese companies, a practice which is against the WTO principles. China maintains that export quotas and duties are in place for the sole purpose of protecting natural resources and promoting sustainable economic development. Even more, at the meeting China expressed befuddlement by the panel requests, stating that it has no intentions of practicing trade distortive measures, and thereby refusing to accept establishment of the panel.
China’s rejection of the panel establishment is a delaying tactic. According to the WTO dispute procedures, a panel will not be established until the next meeting. China is likely to seek delays as long as possible before the process eventually moves forward. In the meantime, it remains the almost “sole survivor” for producing rare Earth minerals.