U.S., Europe and Japan Escalate Rare-Earth Dispute With...

U.S., Europe and Japan Escalate Rare-Earth Dispute With China

http://www.nytimes.com/2012/06/28/business/global/us-europe-and-japan-escalate-rare-earth-dispute-with-china.html?_r=1

BRUSSELS — The European Union, the United States and Japan ramped up their dispute with China over its restrictions on exports of rare earths Wednesday after failing to resolve the case through negotiations at the World Trade Organization.
The European trade commissioner, Karel De Gucht said that the European Union and its partners in the case had asked for a dispute settlement panel to be formed in the wake of inconclusive consultations with China, which were held after the complaint was filed last March.
Mr. De Gucht noted that in January, an appeals tribunal at the W.T.O. upheld a ruling from last year in a related case, in which China was told to dismantle export duties and quotas on nine other industrial raw materials, including bauxite.
The current complaint involves restrictions on rare earths, tungsten and molybdenum, which were imposed by China in 2006 and tightened since then.
“Despite the very clear W.T.O. ruling earlier this year in the first raw materials case, Beijing has not taken steps to remove these export restrictions,” Mr. De Gucht said in a statement. “We regret that we are left with no other choice but to solve this through litigation.”
China currently produces more than 90 percent of the world’s rare earth metals, which are essential to high-technology products from smartphones to electric car motors. The W.T.O. case argues that Beijing is violating free trade rules by putting pressure on companies to move factories to China if they want access to Chinese raw materials.
Chinese officials have previously signaled that their defense in that case will be to use a provision of W.T.O. rules that allows export restrictions for environmental protection and the conservation of scarce natural resources.
In what may have been an effort to buttress that argument, China’s cabinet last week issued its first white paper on rare earth industry policies, saying that poorly regulated mining of rare earth metals had caused widespread environmental damage and promising an extensive cleanup and a crackdown on illegal mines.
The W.T.O. dispute settlement panel, once established, has six months to deliver its report to the parties, who then can later file an appeal.
Keith Bradsher contributed reporting from Hong Kong.