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US, EU, and Japan challenge China’s rare earth export restrictions

In a tripartite challenge against China's export restrictions on rare earth materials, the US, European Union, and Japan filed a complaint with the World Trade Organization. 

By Michail VafeiadisContributor / March 13, 2012

A laborer works at the site of a rare earth metals mine at Nancheng county, Jiangxi province, China in this 2010 file photo.

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The United States, the European Union and Japan, lodged a joint complaint at the World Trade Organization (WTO) Tuesday regarding China’s export restrictions on rare earth exports, materials critical for the production of numerous high-tech products. 

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The three trade powers aim to increase the pressure on Beijing’s export quotas of raw materials, asking the WTO for dispute settlement consultations, which is the first step in a longer process.

The US, EU, and Japan argue that by setting export restrictions such as quotas and taxes, China artificially lowers domestic prices and boosts domestic supply, thus granting local manufacturers an advantage against foreign competition. As a result, Chinese companies have access to more and cheaper rare earth materials, and foreign firms have to grapple with smaller and more expensive supplies.

"China's restrictions on rare earths and other products violate international trade rules and must be removed," said EU Trade Commissioner Karel De Guchtin a EU statement.

Rare earth minerals consist of a group of 17 elements with widespread applications in hi-tech businesses, cell phones, computers, light bulbs, and green products such as wind turbines and hybrid cars. 

China currently monopolizes the rare earths trade, holding approximately 30 percent of the global reserves and producing 97 percent share of the world supply, according to the ruling Chinese Communist party's official organ, the People’s Daily.  For instance, China accounts for 91 percent of the world production of Tungsten, a chemical element used in the electronics, aerospace, medical, and automotive sectors.  

Pressure within the US

Facing re-election later in the year, and with the US economy already dominating the campaign, the Obama administration seems to assume a more confrontational stance on Beijing’s trade policies amid Republican accusations of being too soft with China.

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