China Loses Raw Materials Case In World Trade Organization’s Appellate Body; Possible Implications For China’s Rare Earth Metals Quotas

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The World Trade Organization (“WTO”) Appellate Body found that China’s export restrictions on a variety of raw materials violate WTO trade rules. The restrictions at issue limit China’s exports of bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, and zinc. These products are used as inputs in the steel, aluminum, and chemicals industries. The Appellate Body’s report, circulated on January 30 and adopted by the WTO’s Dispute Settlement Body on February 22, largely affirmed the earlier WTO Panel Report circulated in July 2011. China will enter into negotiations with the complaining parties -- the United States, the European Union, and Mexico -- regarding how it will bring its measures into compliance with the Appellate Body’s report, bringing to a close this dispute that began in 2009.

Representatives of both the United States and the European Union commended this ruling, with U.S. Trade Representative Ron Kirk noting that the Chinese export restrictions not only make it more expensive for U.S. manufacturers to obtain the raw materials they need, but also artificially lower input costs for competing Chinese producers.

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