EU, Japan and U.S. vs. China - Rare Earth Panel established

(Labourers work at a site of a rare earth metals mine at Nancheng county, Jiangxi province March 14, 2012.

Credit: Reuters/Stringer)

I had blogged about China "blocking" the establishment of a Panel to examine complaints into the restrictions on export of rare earths imposed by China. As rightly pointed by two comments on the post, the "blocking" was permitted in the first meeting where the request was placed. The WTO website has reported setting up of  Panel in the subsequent meeting of the DSB. The establishment of the panel was widely reported here, here, here and here. With China producing 90% of the world's rare earth output, this decision of the WTO would have significant impact on the trade in rare earth minerals like tungsten and molybdenum. The NYT and Reuters had earlier reported on the genesis of the dispute.

The European Union's main contention in the DSB meeting was:

"The European Union said that export restrictions in this dispute constitute a violation of China’s WTO commitments undertaken under the General Agreement on Tariffs and Trade (GATT) as well as commitments undertaken in China’s Accession Protocol specifically aimed at these types of restrictions. According to the EU, the export restrictions significantly distort the market and create competitive advantages in favour of China’s manufacturing industry to the detriment of foreign competition."

This dispute would be interesting in terms of the contours of permissible export restrictions under GATT, domestic policy space under Article XX GATT available to China as well as the special obligations China has under its special Accession Protocol (WTO plus obligations).With the U.S., EU and Japan being the complainants, and a host of other countries (11 to be precise) signing up as third parties, it promises to be a keenly fought battle.