Europe and China at loggerheads over rare earths
The EU Commission (the European Union's executive branch) last year started vetting the legality of plans by China to cut back exports of rare earths, which are crucial to the production of high-tech goods and some military systems, including fibre-optic cables and electric cars.
China, which has supplied 97 per cent of the world's rare earths for years, has kept prices so low that mining elsewhere has become uneconomical. However, starting last year, Beijing has progressively cut back on exports, creating problems for non-Chinese high tech companies, which have to wait years for new suppliers to come on-stream.
Now the European Union plans to go before the WTO to get Beijing’s export restrictions lifted.
According to WTO rules, “China has export restrictions on raw materials that are questionable,” a source familiar with the case said. China has responded by arguing that export reductions are needed to protect the environment and scarce resources.
However, trade sources say a confidential WTO report found flaws in similar reasoning used by China in an ongoing legal fight over its export restrictions on raw materials like bauxite and magnesium, used in steel, aluminium and chemical products.
The United States, the European Union and Mexico had launched the case in 2009, complaining that Chinese export restrictions on these minerals discriminated against non-Chinese manufacturers and gave Chinese producers an unfair advantage.
The WTO issued a confidential ruling in the case on 18 February. Its contents will not be released to the public until the parties have had time to review them, something expected within two months. For the WTO, the issue is whether Beijing's curbs on exports of some raw materials are designed to meet the stated goals, or merely favour Chinese manufacturers.
Yesterday, China’s Ministry of Environmental Protection announced tougher environmental regulations for the mining industry, including the rare earths sector, with a goal of promoting a “sustainable and healthy development of the sector”.
The new rules will take effect on 1 October for new rare earth projects. However, mining companies and producers already involved in the sector have until the beginning of 2014 to comply with the new standards. By then, world rare earth production should increase to fill the gap created by lower Chinese exports