China to Appeal WTO Ruling on Raw-Material Export Controls

China will appeal a World Trade Organization finding last month that its export controls over raw materials including coke, zinc and magnesium violate global rules, the Ministry of Commerce said.

“We still feel the country’s policies on exports of raw materials don’t violate the rules of the WTO,” Shen Danyang, spokesman at the ministry, said at a regular briefing in Beijing today. A WTO panel concluded on July 5 that duties and quotas on the export of raw materials violate global trade rules and gave domestic companies an edge.

Complaints against China by the U.S., the European Union and Mexico were bolstered by the WTO ruling, after an 18-month investigation of Chinese quotas, export duties and license requirements on industrial ingredients such as coke, zinc and bauxite. The restrictions had stoked tensions between China and its trading partners, who said the world’s fastest-growing major economy adopted unfair commerce and currency policies.

The commodities at issue included magnesium, manganese, silicon carbide, fluorspar, silicon carbide and yellow phosphorus, which are used by the steel, aluminum, automotive and chemicals industries.

China said the restrictions are necessary to conserve exhaustible natural resources and ease overproduction and emissions of carbon and sulfur gases from furnaces. The U.S., the EU and Mexico said the curbs discourage the export of materials that are critical for their manufacturers, while keeping them cheaper and readily available in China.

Rare Earths
The WTO panel said China was “unable to demonstrate” that the export duties curtailed pollution. The ruling may prompt the U.S. and the EU to make good on threats to file a WTO complaint over Chinese restraints on exports of rare earths, a group of 17 elements used in wind turbines, hybrid cars and defense applications such as guided missiles.

The U.S. and the EU say China should apply the principles of the ruling on raw materials to rare earths and scrap export restrictions.

“The WTO decision sets the precedent to halt China’s export restraints on rare-earth minerals,” Representative Donald Manzullo, an Illinois Republican, said on July 6.

China produces more than 90 percent of the world’s rare earths and has about 30 percent of global reserves of the metals. The Chinese government has curbed output and exports since 2009 to conserve resources and protect the environment, leading to six-fold increases in prices for some rare earths and souring ties with users including the U.S. and Japan.

Shen denied that Chinese policies on exports of rare earths violate WTO rules.

China hasn’t yet appealed the raw-materials decision at the Geneva-based WTO. China must file its appeal by Sept. 2, when the trade body is set to adopt the panel report.

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