U.S., EU, Japan Push for WTO Review of China Rare Earth Export Restraints

International pushback against China’s export restraints on rare earth elements, tungsten, and molybdenum intensified on Wednesday as the U.S., the European Union (EU), and Japan asked the World Trade Organization (WTO) to establish a dispute settlement panel to vet the matter.

The countries claim that China accounts for about 97% of global output of the 17 rare earths, 91% of tungsten, and 36% of molybdenum, but it imposes a set of export restrictions, including export duties, export quotas, and additional requirements that limit access to raw materials for companies outside China. These measures significantly distort the market and favor Chinese industry at the expense of companies and consumers globally, the three petitioners allege.

Responding to the dispute, China earlier this year argued that it only controlled 90% of global production. The U.S., the EU, and Japan had requested formal consultations with China in March. Those ended in April without resolution.

The materials “are key inputs” in American-made products, including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum, and chemicals, said U.S. Trade Representative Ron Kirk in a statement. “It is vital that U.S. workers and manufacturers obtain the fair and equal access to raw materials like rare earths that China specifically agreed to when it joined the WTO,” he added.

The U.S. had previously challenged China’s export restraints on nine other industrial inputs, and this January, backed by the EU and Mexico, it won a similar WTO case. The U.S. Trade Representative’s office said that China’s argument in that case that its export restraints could be justified as conservation or environmental protection measures failed to convince the WTO. China’s export restraints on the materials at issue in the dispute cover about 100 tariff codes, it said.

“Once again, despite China’s characterizations, its export restraint measures on rare earths, tungsten and molybdenum appear to be part of a troubling industrial policy aimed at providing substantial competitive advantages for Chinese manufacturers at the expense of foreign manufacturers,” the office said.

In a statement, EU Trade Commissioner Karel De Gucht said that the EU regretted it was left “with no other choice but to solve this through litigation." Gucht said the EU “appreciates” the environmental challenges linked to the mining of raw materials and encourages all countries to promote an environmentally friendly and sustainable policy for raw materials. “However, the EU believes that export restrictions do not contribute to this aim; there are more effective environmental protection measures that do not discriminate against foreign industries.”

Rare earth elements are a set of 17 chemical elements in the periodic table, specifically 15 lanthanides (lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium) as well as scandium and yttrium. They feature unique magnetic, heat-resistance, and phosphorescence properties. Though they constitute a small share of the finished product, they often cannot be substituted, which can “lead to the disruption of whole value chains,” as the European Commission said.

Tungsten is a hard metal that is used in lighting technology, power engineering, coating and joining technology, and molybdenum is a metallic element that is mainly used as alloying agent for making alloys stronger and more heat-resistant due to molybdenum’s high melting temperature. Alloys are used for filaments for light bulbs and, according to the EU, the world’s iron and steel industries account for more than 75% of molybdenum consumption.

Sources: POWERnews, U.S. Trade Representative’s Office, European Commission

—Sonal Patel, Senior Writer (@POWERmagazine)

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