Following the request to the World Trade Organization (WTO) by the United States, European Union and Japan for the establishment of a dispute settlement panel on what they consider to be China’s unfair export duties and other restraints on rare earths, the Chinese government has continued to defend its policies.

China regulates its rare earth exports by quotas, duties and export pricing requirements, as well as export procedures and requirements. The WTO members have argued that the use by China of export restraints creates scarcity and causes higher prices in global markets, while providing Chinese domestic industry with a significant advantage by way of a sufficient supply, and lower and more stable prices, for the raw materials.

However, China’s Foreign Ministry spokesman Hong Lei, at a press conference, re-emphasized that, while China produces more than 90% of the total global rare earths output, it holds only 23% of global reserves. Its policies on rare earth extraction, production and export management are therefore based entirely on protecting its natural resources and the environment, with no intention to distorting trade to protect domestic industries.

Hong added that China will continue to determine annual rare earth export quotas, taking overall account of domestic resources and production, and international market conditions, and hoped that other countries with significant rare earth resources would actively promote their exploration and production.

Furthermore, Commerce Department spokesman Shen Danyang then also issued a statement in which he reaffirmed that the Chinese government has repeatedly stressed that its rare earth policy goal is to achieve sustainable development, in order to protect both its resources and the environment, and not to distort trade.

It will, however, now need to convince a WTO panel in that respect, despite the fact that, in previous consultations, the WTO has found that, in its opinion, China had not been able to demonstrate that it imposes its restrictions for those reasons.

July 3, 2012

Source: Tax News

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