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China Faces Challenge in Defending Export Limits on Rare-Earth Resources

China may be vulnerable in seeking to defend its restraints on the export of rare earths or other commodities because of conditions it accepted when joining the World Trade Organization in 2001, a former WTO judge said.

While the trade arbiter’s rules let nations tax exports and safeguard natural resources, China signed pledges that it would only tax or limit exports from a list of specific raw materials, said James Bacchus, a lawyer at Greenberg Traurig LLP in Washington. WTO rules prohibit export quotas, he said.

“What makes China vulnerable is the accession agreement it signed” to join the WTO, Bacchus, who was chairman of the WTO’s appellate body, told reporters today at a conference on rare earths in Washington.

China, the source of more than 90 percent of the world’s rare earths used to make disk drives, wind turbines and smart bombs, announced cuts in production in July, prompting calls from Germany, Japan and the U.S. to restore exports.

A separate case the U.S. filed against China on its limits to the export of raw materials used in steel production may set the legal precedent for a complaint on rare earths.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net.

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