VIENNA (dpa-AFX) - The Appellate Body of the World Trade Organization (WTO) ruled Thursday that China's export duties and quotas imposed on rare earths, as well as tungsten and molybdenum, are incompatible with China's WTO obligations.
Backing the claims of the European Union and its co-complainants, the US and Japan, the WTO panel found China's export duties and quotas were not justified for reasons of environmental protection or conservation policy.
The ruling clarified the sovereign right of a country over its natural resources does not allow it to control international markets or the global distribution of raw materials.
Although a WTO Member is allowed to decide on the level or pace at which it uses its resources, they are subject to WTO trade rules once the raw materials have been extracted. The extracting country cannot impose restrictions only on foreign users.
In 2012, China lost another WTO case, brought jointly by the EU, US and Mexico, on export restrictions on raw materials.
Although Beijing subsequently lifted those restrictions, it did not lift similar measures, export quotas and duties, applying to other raw materials, such as tungsten, molybdenum and rare earths.
This prompted the EU and its co-complainants in the case to use the WTO's dispute settlement mechanism again and launch WTO dispute settlement case in March 2012. After initial consultations with China failed to find an amicable solution, the WTO set up a panel in June 2012.
The Panel report was issued on March 26, 2014 and was in favor of the EU and its co-complainants. China appealed the report on April 25.
The reports will now be adopted by the WTO Dispute Settlement Body within 30 days. China will have to comply with the ruling immediately or within a reasonable period of time that it can request for implementation.
EU Trade Commissioner Karel de Gucht qualified Thursday's ruling as 'another milestone in the EU's efforts to ensure fair access to much-needed raw materials for its industries'.
The raw materials involved in the case-- several rare earths, as well as tungsten and molybdenum-- have a wide range of uses in hi-tech and green goods, automotive and machinery manufacturing, chemicals, steel and non-ferrous metal industries.
China is a monopoly supplier of rare earths and tungsten with more than 90% share of world production of both raw materials. It is also the lead producer of molybdenum worldwide and accounts for 36% of global production.
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