The EU, US, and Japan have taken the next step in their
dispute with China over the latter’s export restrictions on rare earths,
formally requesting the establishment of a dispute panel at Tuesday’s WTO
Dispute Settlement Body (DSB) meeting. While the request was rejected by
Beijing, trade experts expect a second panel request to be made later this
month.
The request is the latest effort by Brussels, Washington,
and Tokyo to prompt Beijing to lift its export restrictions on rare earths, as
well as tungsten and molybdenum. The 17 rare earth elements have unique
magnetic, heat resistant, and phosphorescent properties, and are essential for
the production of high-tech and green energy products, including wind turbines,
engines for electric and hybrid vehicles, and medical equipment.
Beijing, which produces over 90 percent of the global
supply of rare earths, maintains that these measures are intended to limit
environmental damage and conserve natural resources, with officials recently
defending the restrictions in a white paper issued on 20 June.
“The government is strengthening the management of the
industry to protect the environment and resources, which is beneficial for the
sustainable development of the industry and totally conforms to WTO
regulations,” Su Bo, China’s vice minister of industry and information
technology, said last month. “The protection of the environment is never a
pretext for gaining advantage or increasing economic returns.”
The complaining parties, for their part, argue that the
export restrictions are disruptive to domestic industries and result in
increased production costs, while also providing Chinese competitors with
cheaper and easier access to the elements compared to foreign manufacturers.
“China’s restrictions on rare earths and other products
are a violation of China’s WTO commitments and continue to significantly
distort global markets, creating a disadvantage for our companies,” EU Trade
Commissioner Karel De Gucht
said in a statement
on 27 June.
The panel request comes after formal consultations
between the parties - the first step in the WTO dispute settlement process -
failed to reach a resolution. A second panel request from the complainants is
widely expected at the upcoming DSB meeting on 23 July; should the second request
be made, a panel will automatically be established, as required by WTO rules.
Experts anticipate a panel ruling in late summer 2013, at the earliest.
Export restrictions draw attention in Indonesia
The outcome of this case is being highly watched by trade
observers, given its potential ramifications for the use of export restrictions
in other countries. Just last week, Indonesia announced it would be moving
forward with its plan to tax unprocessed mineral exports, despite protests from
both the foreign and domestic business communities.
The new tax is designed to prevent overexploitation of
Indonesian mines before Jakarta’s 2014 ban on the export of unprocessed metals
goes into effect, government officials have said.
Under the impending 2014 ban, miners will be expected to
either establish smelters or cooperate with other companies to process minerals
ahead of exporting; if they wish to continue exporting unprocessed ores once
the ban is in place, miners will need to demonstrate concrete plans for eventually
implementing one or both of these requirements.