The World Trade Organisation's latest ruling on China's strict limits on rare-earth exports confirms its principle that restrictions imposed by one country exclusively seeking to protect its own interests violate global trade rules.
The world trade body recently arrived at its final conclusion that China’s rare-earth export restrictions and related actions are a violation of WTO agreements. This finalised Beijing’s loss of the case.
China should accept the WTO’s decision and immediately rectify its unfair export restrictions.
Rare earths are used in such high-tech products as high-performance motors for hybrid automobiles and smartphones. China is the world’s largest producer of such valuable raw material, accounting for more than 90 per cent of global production.
China greatly lowered its rare earths export ceiling in 2010. Beijing has also introduced export duties on rare earths and some rare metals. In 2012, Japan, the United States and the European Union joined hands in bringing a case before the WTO, insisting these Chinese actions were violating WTO agreements.
China defended its rare earths export restrictions, arguing they aimed to protect the environment and conserve natural resources. Despite its export restrictions, however, China has continued to supply rare earths to its own domestic manufacturers. Beijing has clearly been giving preferential treatment to domestic corporations in the supply of rare earths.
Given the circumstances, the WTO had every reason to fully accept the assertions put forward by Japan, the United States and the EU to the effect that China’s export restraints were a protectionist move.
Taming the tiger
In the past, China has continued to exploit its natural resources as leverage to exert diplomatic pressure on other nations. In 2010, for instance, Beijing temporarily suspended rare earths exports to Japan amid heightened tensions between the two countries that arose after a Chinese fishing boat struck two Japan Coast Guard vessels in waters off the Senkaku Islands in Okinawa Prefecture.
Such conduct violates the WTO’s fundamental rules, including a ban on the discriminatory treatment of a given nation.
China joined the WTO in 2001. Since then, the country has reaped the benefits of free trade to achieve high economic growth. Beijing should take its obligations to heart as an economic power and adhere to global trade rules.
Japan cannot help but continue to rely on imports for rare earth and nearly all other scarce resource supplies. It is important to ensure that export restrictions by other countries do not deal a serious blow to our nation’s economic activities.
The Japanese government and business circles have taken steps to secure their rights and interests tied to rare earth supplies, including an attempt to increase the number of nations that can sell such raw material to Japanese manufacturers. Further action should be taken to achieve that goal.
Recycling should also be promoted to extract valuable materials from used electronic devices, as well as the development of substitutes for rare earths.
We hope the government and the private sector will join forces to create the necessary technologies, despite our disadvantage as a resource-poor nation. Japan’s handicap in this respect could be used as a springboard to step up efforts.