So the WTO controls how a nation prices its exports?
July 5 (Reuters) — China broke international law when it curbed exports of coveted raw materials, the World Trade Organization ruled Tuesday, in a landmark case threatening Beijing’s defense for similar export brakes on rare earths.
A WTO legal panel dismissed China’s claim that its system of export duties and quotas on raw materials — used in the production of steel, electronics and medicines served to protect its environment and scarce resources.
China struck a defiant note in response to the ruling, which it is expected to appeal.
The WTO said in a statement, “The panel found that China’s export duties were inconsistent with the commitments that China had agreed to in its protocol of accession.”
“The panel also found that export quotas imposed by China on some of the raw materials were inconsistent with WTO rules,” it added.
The ruling hands a victory to the United States, the EU and Mexico, which took China to the WTO in 2009 saying export restrictions on raw materials including coke, bauxite and magnesium discriminated against foreign manufacturers and give an unfair advantage to domestic producers.
It coincides with growing anxiety among markets and policymakers about a trend among resource-rich countries to rein in exports of commodities — from wheat to iron ore — as supplies fall behind global demand.
The WTO issued an unusually stark warning about such export policies last month, saying they risked creating serious shortages.
The case is of particular importance to the EU, whose raw materials purchases from abroad make up 10 percent of its total imports, and which are used in production and manufacturing processes it says employ 30 million Europeans.
More important than the potential for providing easier access to the eight raw materials in question, the ruling sets a potential precedent in favor of the free circulation of raw materials, particularly of rare earth minerals used to make high-tech goods. China produces 97 percent of the world’s supplies of the crucial industrial inputs, and has begun cutting exports to the dismay of importers.
The United States and EU’s top trade negotiators as well as industry groups said the ruling should serve to pressure China and other states into dropping such restrictions.
U.S. Trade Representative Ron Kirk hailed the “significant victory” on Tuesday, but warned that “China’s extensive use of export restraints for protectionist economic gain is deeply troubling.”
EU Trade Commissioner Karel De Gucht called for a negotiated peace with Beijing to avoid a full-fledged trade war, and vowed to address the issue during a visit to Beijing next week.
But he insisted the EU, United States and Mexico could still opt for legal action if China failed to cooperate.
“What is important about this judgement is that it sets the rules for the future and that it will become an important element in discussions with every country” that restricts raw material exports, De Gucht told Reuters before addressing EU lawmakers in Strasbourg, France.
“What I hope is that we can come to a solution through discussions so we don’t have to litigate anymore,” he said.