US, Japan and EU Take Rare Earths Issue to WTO, 3/13/2012.

US, Japan and EU Take Rare Earths Issue to WTO

March 13, 2012. The United States filed a complaint (nominally a request for consultations) with the World Trade Organization (WTO) against the People's Republic of China (PRC) alleging that it is imposing export restraints, export duties, and export quotas on rare earth materials (REM) in violation of its WTO commitments.

The Office of the U.S. Trade Representative (OUSTR) announced back in December of 2010 that it might take this action. See, story titled "OUSTR Is Considering Filing WTO Complaint Against PRC For Its Rare Earths Export Restraints" in TLJ Daily E-Mail Alert No. 2,189, December 29, 2010.

Japan and the European Union took parallel actions. The three complaints also encompass tungsten and molybdenum. See also, the WTO web page titled "US, EU and Japan file disputes against China", with hyperlinks for downloading pleadings.

Karel De Gucht, the European Trade Commissioner, stated in a release that "China's restrictions on rare earths and other products violate international trade rules and must be removed. These measures hurt our producers and consumers in the EU and across the world, including manufacturers of pioneering hi-tech and 'green' business applications".

Karel De Gucht De Gucht (at left) added that "Despite the clear ruling of the WTO in our first dispute on raw materials, China has made no attempt to remove the other export restrictions. This leaves us no choice but to challenge China's export regime again to ensure fair access for our businesses to these materials."

The Computer and Communications Industry Association (CCIA) stated in a release that these export quotas and export duties "artificially increase prices for high-tech manufacturers outside China to the advantage of domestic Chinese manufacturers in violation of their international commitments. In addition, these policies seek to coerce foreign manufacturers to locate their production in China, leading to technology transfers."

The CCIA added that "China's export restrictions are part of a continuing pattern of flouting trade rules to achieve commercial advantage over foreign competitors. China uses social morals to attempt to justify its Internet censorship of foreign sites while domestic sites carry the same banned content. Similarly, China uses environmental protection as a pretext for its rare earth minerals policy yet insists on an approach discriminating against foreign entities."

REMs have a wide range of uses. Among other things, they are used in such ICT products as fiber optic cable and smart phone screens. However, one of their keys uses in is making permanent magnets, which have the properties of compactness, high strength, and very strong magnetic fields. These magnets are used in computer hard drives, cell phones, loudspeakers, headphones, magnetic resonance imaging, cordless electric tools, and other products.

The rare earth elements from which REMs are made are Scandium, Yttrium, Lanthanum, Cerium, Praseodymium, Neodymium, Promethium, Samarium, Europium, Gadolinium, Terbium, Dysprosium, Holmium, Erbium, Thulium, Ytterbium, and Lutetium. See also, periodic table.

Almost all of the world's supply of REMs now comes from the PRC. However, the rare earth elements are also located in many other nations, including the US. They must be mined and extracted. The US has more stringent environmental protection regulation, as well as more tedious permitting processes, than the PRC.

There are companies in the US, such as Molycorp Minerals, that could produce REMs. See, story titled "Molycorp and Hitachi Plan Joint Ventures for Production of Rare Earth Magnets" in TLJ Daily E-Mail Alert No. 2,189, December 29, 2010. Molycorp lobbyists have been active on Capitol Hill for several years.