In a ruling that will have ramifications for rare earth supplies, the World Trade Organization ruled today that China is improperly restricting the export of minerals.
China has been throwing restrictions on some exports claiming the country faces critical shortages of raw inputs needed for its manufacturing sector, but the WTO's Appellate Board, which largely upheld a previous ruling on the same case, did not see it that way.
"The Appellate Body found that the term 'critical shortage' refers to those deficiencies in quantity that are crucial and of decisive importance, or that reach a vitally important or decisive stage," wrote the WTO explaining its decision.
"On the basis of these findings, the Appellate Body upheld the Panel's conclusion that China did not demonstrate that its export quota on refractory-grade bauxite was' temporarily applied' to either prevent or relieve a 'critical shortage'."
There has been no comment from Chinese officials. James Bacchus, a former chairman at the WTO, told the New York Times that he expects that the Chinese will comply with the ruling.
U.S. Trade Representative Ron Kirk lauded the decision.
"Today’s report is a tremendous victory for the United States – particularly its manufacturers and workers,”Ambassador Kirk said in a statement.
The complainants were the the United States, Mexico, and the European Union who challenged restrictions the Chinese had placed on exportation of certain forms of bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorous, and zinc.
The complaints felt export restraints on industrial products skewed the playing field against the United States and other countries.
"[China] can artificially increase world prices for these raw materials while artificially lowering prices for Chinese producers," said the Office of the United States Trade Representative.
"This enables China’s domestic producers to produce lower-priced products from the raw materials and thereby creates significant advantages for China’s producers when competing against U.S. and other producers, both in China’s market and other countries’ markets. Such export restraints can also create substantial pressure on foreign producers to move their operations and, as a result, their technologies to China."
Rare earth elements were not part of the ruling, but the decision will leave China will less means to restrict exports on all minerals.