US, Japan and EU Request WTO DSP for REM Complaint Against PRC

July 10, 2012. On June 27, 2012, the Office of the U.S. Trade Representative (OUSTR), along with representatives of Japan and the European Union (EU), requested that the World Trade Organization (WTO) establish a dispute settlement panel (DSP) to rule on their complaints against the People's Republic of China (PRC) that allege that the PRC is imposing export restraints, export duties, and export quotas on rare earth materials (REM) in violation of its WTO commitments.

The WTO's Dispute Settlement Body (DSB) met on July 10. The WTO announced that "The DSB deferred the establishment of a panel."

The US, Japan and EU filed complaints, which are nominally requests for consultations, in March. See, US complaint, Japan complaint, and EU complaint. See also, stories titled "US, Japan and EU Take Rare Earths Issue to WTO" and "OUSTR Explains Rare Earths Request for Consultations" in TLJ Daily E-Mail Alert No. 2,349, March 14, 2012.

The US, Japan and EU requested that the WTO establish a DSP on June 27. See, OUSTR release.

The WTO stated in a release that the PRC argued at the July 10 meeting that "said it was not in a position to accept the establishment of a panel requested by the United States, the European Union and Japan regarding its measures related to the exportation of rare earths".

The PRC argued "that its policies in question are aimed at protecting natural resources and achieving sustainable economic development. It said it was puzzled by the complainants' initiation of the panel process as it has no intention of protecting its domestic industry through means that would distort trade. It added that at the present meeting, it was not in a position to accept the establishment of a panel."

Some in the US have offered some corroboration for the PRC's environmental claims. For example, Sen. Lisa Murkowski (R-AK), has argued that "Instead of settling for Chinese imports, the president should be taking steps to jumpstart development of our own supplies of rare earth elements".

US environmental regulation terminated the production of REMs in the US. See also, story titled "Sen. Murkowski Assigns Some Blame for Rare Earths Problem on US Government Regulation" in TLJ Daily E-Mail Alert No. 2,349, March 14, 2012.

The WTO also reported that "The United States, the European Union and Japan told the DSB they were, respectively, requesting the establishment of a panel as their consultations with China had failed to resolve their concerns."

The WTO stated that the US argued that "China's export restraint measures gave China the ability to significantly affect global supply and pricing". The EU argued at the July 10 meeting that the PRC's "policies put pressure on foreign producers to move their operations and technologies to China".

Japan argued that "China's export restrictions have caused a short supply of the materials in the international market and significant price differences between China's domestic market and export market. It said that Japanese manufacturers have faced difficulty in purchasing the materials from China, putting them at a disadvantageous position with their Chinese counterparts."

REMs have a wide range of uses. Among other things, they are used in such information and communications technology (ICT) products as fiber optic cable and smart phone screens. However, one of their key uses is in 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.