July 5th, The World Trade Organization (WTO) decided that the export restrictions imposed by China on a range of key industrial minerals were not justified by an environmental point of view and should be lifted.
The procedure was initiated by the EU and the United States in June 2009 because they feared that their high-tech sector lack of essential raw materials such as bauxite and magnesium used for producing steel, aluminum and chemicals.
The reports by the WTO expert panel shows that China did not honored the commitments it made when it joined the organization in 2001. China was committed to eliminating all export duties, except for certain products listed separately, and promised not to apply for export quotas.
The WTO therefore calls on China to ensure that its measures are consistent with its international commitments.
China has advanced in its defense that the export restrictions were necessary to protect exhaustible natural resources and reduce harmful emissions from the furnaces.
At the same time, the EU and the U.S. claim that Chinese export taxes and quotas discourage the export of minerals, generate a shortage and lead to soaring prices, while keeping these minerals and cheap accessible to the domestic industry in China.
The experts noted yesterday that the export restrictions on trade in these materials do not effectively protect the environment because the production and domestic consumption of these products in China were not regulated in the same way.
According to the WTO, it is not possible to protect domestic producers from international competition on behalf of the environment.
European Commissioner for Trade, Karel De Gucht welcomed the WTO decision and described it as “a clear verdict in favor of open trade and fair access to raw materials” which will bring us closer “to the application of fair competition for raw materials.”
“I guess China will now make its export regime in accordance with international rules,” he added.
CEFIC, European Chemical Industry Council, welcomed the WTO decision, calling it a “good starting point for the consideration of other export restrictions and violations of WTO rules in the world.”
The organization stressed the importance of a “free and undistorted access to raw materials” for the sector, adding that any price distortion to materials had “a direct negative impact on the competitiveness of the sector, since raw materials may even represent more than half the cost of production. ”
According to the mechanisms of dispute settlement to the WTO, both parties have the right to appeal within 60 days after the report of the experts.
The Chinese Ministry of Commerce said on July 6th that they will examine the findings of the panel and take necessary measures in accordance with WTO practices.
Trade experts of the WTO and China have told Bloomberg that it was likely that China might appeal the decision.
At the same time, huge deposits of rare earths were discovered in the Pacific Ocean and minerals could be easily extracted, said Japanese scientists earlier this month.