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After WTO Decision, China Establishes Rare Earth Regulatory Body

by Mary Swire,, Hong Kong

11 April 2012

Following last month’s request by several countries for consultations at the World Trade Organization (WTO) on what they consider to be China’s unfair export restraints on rare earths, the latter has now set up a regulatory body to oversee their exploitation.

The 17 minerals that make up ‘rare earths’ are incorporated into many high technological goods, including superconductors, hybrid car components (primarily batteries and magnets), flat-screen televisions, mobile phones, lasers and many defence-related products.

China produces over 90% of the world's rare earths supply, but has pointed out that it only holds around one-third of global reserves. However, there has been growing concern that the world may soon face a shortage, particularly as China regulates its exports by quotas, duties and export pricing requirements, as well as related export procedures and requirements.

The WTO members argued that the use by China of export restraints creates scarcity and causes higher prices in global markets, and provides Chinese domestic industry with a significant advantage by way of a sufficient supply, and lower and more stable prices, for the raw materials.

While China continued to insist that some of its measures were justified because they relate to the conservation of exhaustible natural resources, the WTO could not agree as it found that China had not been able to demonstrate that it imposed the restrictions for that reason.

The Chinese Ministry of Commerce’s immediate reaction to the WTO consultation request had been to re-confirm that it would continue, within WTO rules, and not with the intention of protecting domestic industries, to manage its resources and reduce excessive mining, based on sustainable development and environmental concerns.

Subsequently, the formation has now been announced, by the Chinese Ministry of Industry and Information Technology that will be its head, of an association to bring together all stakeholders in the rare earth industry, including its 155 member companies. Its purpose is to develop policies to promote the sustained and healthy development of the rare earth industry.

Its focus, it was reported, will therefore be to enhance environmental protection, stimulate a reorganisation and streamline the rare earth industry by the formation of larger companies, strictly enforce the industry’s mandatory production plan, and strengthen further its laws and regulations.

The association will also work towards a coordination of rare earth pricing, and will hope to develop its international contacts so that it can resolve the existing trade friction and disputes according to international standards and WTO rules.

TAGS: environment | tax | mining | export duty | law | tariffs | World Trade Organisation (WTO) | China | regulation | trade

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