China accused of breaking trade rules

China accused of breaking trade rules

China has been accused of breaking world trading rules by limiting its exports of materials vital for high-tech industries.

The United States, the European Union and Japan have complained to the World Trade Organisation about the availability of rare earths, minerals essential for making things such as hybrid cars, weapons, flat-screen TVs, mobile phones, mercury-vapour lights, and camera lenses.

China has cut its export quotas over the past several years to cope with growing demand at home, although the government also cites environmental concerns as the reason for the restrictions.

US industry officials suggest it is an unfair trade practice, against rules established by the WTO, a group that includes China as a member.

EU Trade Commissioner Karel De Gucht said China's export quotas and export duties give Chinese companies an unfair competitive advantage, and must be removed.

"These measures hurt our producers and consumers in the EU and across the world," he said.

The action is part of president Barack Obama's broader effort to crack down on what his administration sees as unfair trading practices by China. Senior administration officials said Beijing's export restrictions give Chinese companies a competitive advantage by providing them access to more of these rare materials at a cheaper price, while forcing US companies to manage with a smaller, more costly supply.

The three separate but coordinated filings with the WTO formally request dispute settlement consultation, which is the first step in a WTO complaint.

If no resolution is found after 60 days, the dispute can be transmitted to a WTO Panel for a ruling. At the end of the process, depending on the outcome, sanctions against China are possible.

In addition to rare earths, the complaints cover tungsten, and molybdenum, a metallic element used in making different types of steel as well as in other industries.

Anticipating the complaints, China earlier defended its curbs on production of rare earths as an environmental measure.

Global manufacturers that depend on Chinese supplies were alarmed by Beijing's decision in 2009 to limit exports while it built up an industry to produce lightweight magnets and other goods that use them.

China has about 30% of rare earths deposits but accounts for 97% of the world's production.

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