Newspaper article International New York Times

China Violated Trade Law on Rare Earths, Panel Says ; Sanctions Are Possible If Ruling by W.T.O. Group on Export Quotas Stands

Newspaper article International New York Times

China Violated Trade Law on Rare Earths, Panel Says ; Sanctions Are Possible If Ruling by W.T.O. Group on Export Quotas Stands

Article excerpt

China has broken international trade law by restricting the export of rare earth elements, a World Trade Organization panel said Wednesday.

China has broken international trade law by restricting the export of rare earth elements and other metals crucial to modern manufacturing, a World Trade Organization panel said Wednesday. That conclusion opens the possibility that Beijing will face trade sanctions from the United States, which brought the case, and the European Union and Japan.

China produces more than nine-tenths of the global supply of the strategically important metals, which are essential to a host of modern applications including smartphones, wind turbines, industrial catalysts and high-tech magnets. Prices soared in 2010 after Beijing cut export quotas by about 40 percent, to just over 30,000 tons, saying the restrictions were necessary on environmental grounds.

But critics said the quotas gave an unfair advantage to China's domestic manufacturing industries. Members of the World Trade Organization panel considering the case in Geneva agreed with that assessment.

The United States, which is almost totally dependent on China for the metals, filed the case in March 2012, and the European Union and Japan joined on Washington's side soon after. They challenged the export restrictions on 17 rare earths, as well as two metals used in steel alloys, molybdenum and tungsten. An interim report by the W.T.O. panel last October had indicated that China would be found in violation of trade law in the case.

The dispute has attracted worldwide attention, as it has been framed by some as pitting a sovereign government's right to regulate destructive environmental practices against global trade rules.

China has amply demonstrated the damage caused at each step of the production process, from mining and refining of the metals to disposal of the waste, and Beijing has been shutting down some of the worst offending producers, among them criminal enterprises. The soil in parts of China is scarred from the concentrated acids used to leach the ores, making farming impossible, while giant tailings ponds full of toxic -- and sometimes radioactive -- chemicals attest to the fact that the recovery of every pound of rare earth metals entails the creation of hundreds or thousands of pounds of waste. …

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