WTO backs U.S. over China in rare earths dispute
• A World Trade Organization dispute settlement panel agrees with the U.S. in a major dispute, finding in favor of U.S. claims that China’s imposition of export restraints on rare earths, tungsten and molybdenum breach WTO rules.
• China, which produces more than 90% of the world's rare earth elements, imposed strict rare earth export quotas in 2010, saying it was trying to curtail pollution and preserve resources; prices soared by hundreds of percent, and the U.S., EU and Japan complained that the restrictions gave Chinese companies an unfair competitive edge.
• Rare earth miners include Rare Element Resources (REE) and Molycorp (MCP) and U.S. Rare Earths (UREE)
WTO Names China the Loser in REE Export Quota Dispute
By Charlotte McLeod2 - Exclusive to Rare Earth Investing News3
In a decision that’s been two years in the making, the World Trade Organization (WTO) yesterday ruled5 that China’s export restrictions on rare earth elements (REEs), molybdenum6 and tungsten7 are inconsistent with its obligations as a WTO member.
The news comes five months after China said8 it had lost the case, and four months after the WTO was supposed to notify the parties involved in the case of its outcome, The Wall Street Journal states.
Despite the delay, the United States, European Union and Japan, which brought the case11 to the WTO back in 2012, have expressed no hard feelings. Quite the opposite, in fact. Reuters quotes12 EU Trade Commissioner Karel De Gucht as saying, “[t]oday’s ruling by the WTO on rare earth shows that no one country can hoard its raw materials from the global market place at the expense of its other WTO partners.”
On a similar note, US Trade Representative Mike Froman said, “[w]e hope this will discourage further breaches of WTO rules that hurt American manufacturers. This victory shows that we stand prepared to take action whenever necessary to protect the high-quality, middle-class American jobs that trade supports,” as per The Wall Street Journal.
China, on the other hand, is not pleased at all. The country, which according13 to the Financial Times first implemented export restrictions in 2009, has long decried the idea that they were put in place to give the country a competitive edge, maintaining that they are aimed at protecting the environment and conserving minerals.
Based on recent comments from China’s Ministry of Commerce, it seems the country’s stance has not changed since the WTO ruling. It said in a statement, “China believes that these regulatory measures are perfectly consistent with the objective of sustainable development promoted by the WTO,” Reuters notes.
It’s that attitude that has many expecting China to appeal the WTO’s ruling. One such person is an official at the Chinese Society for Rare Earths who thinks “China will definitely appeal because the WTO ruling is unfair,” as per the Financial Times. A member of China’s Ministry of Commerce expressed the same belief back in October, when China first came forward to say it lost the case.
For its part, China has not commented one way or the other, The New York Times notes14. However, market watchers won’t have to wait long to see what the Asian nation decides to do — it now has just 60 days to appeal. If that happens, the Appellate Body, the permanent appeals tribunal of the WTO, should reach a decision by the end of July.
However, don’t expect the tribunal to reach a “significantly different” ruling than the one just provided by the WTO, James Bacchus, a former Appellate Body chairman who is not involved in the current case, told The New York Times. “[T]he judges there can rule only on matters of legal principle, not on the panel’s findings of fact,” he explained.
Also don’t necessarily expect the ruling to significantly impact the market. While another Reuters article15 quotes Ryan Castilloux, founding director at Adamas Intelligence, as saying that if yesterday’s ruling “leads to a softening of China’s rare earth industry policy measures, the nation’s only tangible defence becomes competing head-to-head on price with emerging global producers,” not everyone agrees. For instance, The Wall Street Journal states that “[t]he decision is unlikely to have a dramatic effect on world prices.”
For now, investors had best wait to see if China appeals.
AI
