China defends export limitations on rare earths

A Cabinet official rejected complaints Beijing is using the environment as an excuse to support fledgling Chinese producers of lightweight magnets and other rare earths products by limiting supplies to foreign rivals in violation of its free-trade pledges.

“The protection of the environment is never a pretext for gaining advantage or increasing economic returns,” said Su Bo, a deputy industry minister, at a news conference.

China has about 30 percent of rare earths deposits but accounts for more than 90 percent of production. Beijing alarmed global manufacturers by imposing export quotas in 2009. It is trying to build up domestic manufacturers to capture more of the profits that now go to U.S., Japanese and European companies that transform rare earths into mobile phone batteries, camera lenses and other products.

The U.S., EU and Japan filed WTO complaints in March accusing Beijing of violating its commitments to the global free-trade body. They say export limits push up rare earths prices abroad and give buyers in China an unfair advantage.

Officials held talks April 25-26 in the first step of the WTO dispute-resolution process, said another official, Gao Yun, deputy director-general of the industry ministry's rare earths office. Gao gave no details of the talks.

If no resolution is reached after 60 days, the dispute can be sent to a WTO panel for a ruling. Depending on the outcome, sanctions against China are possible.

“All these measures fully conform to WTO rules,” Gao said. He said Beijing wants a quick resolution but said it will “actively use world trade rules” to protect its companies.

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