WTO to Sanction China

February 17th, 2011
in econ_news

mining Econintersect:  The World Trade Organization will issue a preliminary report Friday that will find China guilty of using protectionism as a trade policy for natural resources.  China will be accuse of stock piling surplus mined natural resources instead of allowing them to be exported.  This particular ruling will not address the materials known as rare earths for which China is the world's leading producer but have been in the news recently because China has placed export restrictions on them in the face of potential shortages throughout the world.

Follow up:

There are seven materials that will be in the opinion, including zinc (China is the world's leading producer) and coke.  According to the Wall Street Journal, China is the world's leading producer of many minerals, including cadmium, gold, indium, iron ore, lime, lead, manganese, mercury, molybdenum, phosphate, salt, tin, tungsten, vanadium and zinc.

It is not known which are the seven materials that will be covered by the ruling on Friday and it will not be know then because the ruling letter sent to China will not be made public.

The ruling is in response to a complaint made by Mexico, the U.S. and the EU in 2009.  It is expected that because of this ruling a complaint will be filed over China's restriction of rare earth exports used in a number of electronic device applications.  China produces most of the world's rare earth metals.

The following graph (WSJ) shows the total exports of metal ores for the various countries of the world:

metals exporters     

China has argued that export restrictions are necessary to protect the environment. After the final report is released in April, China can appeal if the prliminary finding is upheld. Should that the appeal fail, the country must remove the restrictions or potentially face sanctions.

Source:  China Economic Review and Wall Street Journal 

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