WTO issues ruling on China export restraints

Friday,Feb18,2011

* US, EU, Mexico filed case against China in 2009
* Ruling could set precedent for China rare earth curbs
* Decision expected to be made public by early summer (Updates throughout)

WASHINGTON, Feb 18 (Reuters) - The World Trade Organization on Friday issued a confidential preliminary ruling in a landmark case against China's export restrictions on raw materials used to manufacture steel, aluminum and chemical products.

The United States, European Union and Mexico launched the case in 2009, complaining that Chinese export restrictions on minerals such as bauxite and magnesium discriminated against foreign manufacturers and gave an unfair advantage to domestic producers.

Beijing has argued it needed to restrict exports of the raw materials for environmental reasons.

"Under WTO rules, this interim report is confidential and we cannot comment on its contents at this time," said Nefeterius McPherson, a spokeswoman for the U.S. Trade Representative's Office.

"The report will be made public when it is circulated to WTO members. We currently expect the final report to be circulated sometime in late spring or early summer of 2011," McPherson said.

The United States, EU and Mexico argue that China's export curbs violated both general WTO rules and specific commitments that Beijing made when it joined the world trade body in 2001.

The case does not cover China's export restrictions on rare earth minerals used in smart phones, electric car motors and high-tech industrial equipment which have also raised concern in the United States, EU and Japan.

McPherson said there was still a possibility of the United States filing a WTO challenge on that front.

"We have been and remain very concerned about China's systemic use of export restraints," she said.

A former WTO appellate body judge said the ruling will be precedent-setting.

"If the United States prevails in this dispute it would be a very significant ruling related to increasingly widespread phenomenon of export restrictions in world trade," said James Bacchus, now at Greenberg Traurig in Washington.

If China wins, then "other kinds of export restrictions imposed by China and other countries may be protected by environmental defenses as well," Bacchus said.

China argues that it must restrict the production and export of the raw materials in the WTO dispute and rare earths to protect the environment and conserve its own resources.
(Reporting by Doug Palmer; Editing by Vicki Allen,sourced:Thomson Reuters)