U.S., Japan and the E.U. dispute China’s decision on rare earths at the WTO

The U.S., Japan and the European Union have filed an official complaint at the World Trade Organization this morning, urging the body to take actions against China’s restrictions on these metals.

“China’s restrictions on rare earths and other products violate international trade rules and must be removed. These measures hurt our producers and consumers in the EU and across the world, including manufacturers of pioneering hi-tech and ‘green’ business applications” said EU Trade Commissioner Karel De Gucht in a statement.

“Despite the clear ruling of the WTO in our first dispute on raw materials, China has made no attempt to remove the other export restrictions. This leaves us no choice but to challenge China’s export regime again to ensure fair access for our businesses to these materials,” Gucht added.

This is the second time that the EU challenges China’s export restrictions on raw materials, but the case in which the U.S. and Japan join the plea. In January, the WTO ruled in favour of the EU, forcing China to lift the ban on exports. However, rare earth elements were not part of the ruling.

China has been throwing restrictions on some exports claiming the country faces critical shortages of raw inputs needed for its manufacturing industry, especially the tech sector.

The action is part of Obama’s administration efforts to reduce what it sees as unfair trading practices by China. Senior administration officials quoted by Reuters, said Beijing’s export restrictions give Chinese companies a competitive advantage by providing them access to more of these rare materials at a cheaper price, while forcing US companies to manage with a smaller, more costly supply.

No ‘Skirting the Rules’

Later this morning, President Barack Obama warned China that it would not be allowed to gain a competitive advantage in world trade by “skirting the rules,” he said during remarks at the White House.

“If China would simply let the market work on its own, we’d have no objection,” Obama said. “But their policies currently are preventing that from happening. And they go against the very rules that China agreed to follow.”

United Steelworkers (USW) International President Leo W. Gerard said President Obama and Ambassador Kirk were to be applauded “for calling China on the carpet.”

“Chinese export restraints have a devastating impact on production and jobs here in the United States by limiting or raising the cost of these materials to our companies,” Gerard said in a statement.

He added that there has already been “significant damage globally to downstream users of these key raw materials from China’s comprehensive and illegal scheme to restrict access to various raw materials.”

China’s reaction

China’s Ministry of Commerce (MOC) said it will properly deal with a dispute settlement request on rare earth made by three major economies in accordance with WTO rules.

“Previously, China has been in constant communication and contact with related countries about its export policy on raw material products, and has emphasized repeatedly that the policy aims to protect resources and the environment, and realize sustainable development,” the statement said.

China has no intention of protecting domestic industries by distorting its foreign trade, the MOC added.