Rare Earth Export Adjustment Dispute: China Says Quota Policy Does Not Violate WTO Commitment

Rare Earth Export Adjustment Dispute: China Says Quota Policy Does Not Violate WTO Commitment

Is limiting rare earth exports a tool for China to use the outside world? The frequent frequency of high-level Chinese and foreign positions and the application of China's rare earth export quota in 2011 have kept the topic hot.
On November 13, Akihiro Ohata, Minister of Economy, Trade and Industry of Japan, held talks with Zhang Ping, director of the National Development and Reform Commission of the People's Republic of China during the summit of Yokohama, the APEC leader. Rare earth is one of the topics. According to a report by the Kyodo News Agency, Zhang Ping said that this issue will be properly resolved in the near future.
Earlier, China's Minister of Commerce Chen Deming once stated in Paris, France that China will maintain exports of rare earths in 2011.
The current information shows that China's rare earth export policy has changed in the past three years, and no policy reversal has taken place in 2011. However, behind the rare earth disputes, the problems of mining, smelting, trading, and reserve management of China's resource products still need to be solved.
Origin of industrial adjustment Rare earth is known as "industrial gold." The most direct cause of this rare earth dispute is the reduction of China's rare earth export quota.
On July 8, the Ministry of Commerce issued the second batch of rare earth general trade export quotas for 2010. The total quota of domestic and foreign-funded enterprises totaled 7976 tons, which was less than half of the quotas for the same period of previous years.
The drastic reduction in quotas has caused dissatisfaction among Japan, the United States and other rare earth importing countries. In response, senior Chinese government officials have stated on many occasions that China has cited the need for environmental protection.
At the end of the third high-level dialogue between China and Japan at the end of August, Minister of Commerce Chen Deming said that China's restriction on exports of rare earths is due to comprehensive considerations such as promoting economic development and protecting the environment and national security. ".
He also pointed out that China not only restricts the export of rare earths, but also limits the entire chain of exploitation, production, and trade. This approach is in line with WTO rules. “Overall, China will gradually reduce the export and production restrictions of rare earths, but due to the large increase in exports in the first half of this year, the restrictions for the next six months will be more apparent.”
In fact, China has been adjusting the rare earth industry for several years. In order to solve the problem of relatively dispersed rare earth enterprises, extensive mining methods, and weak environmental protection awareness, starting in 2007, China began to implement mandatory planning for rare earth production and started to reduce rare earth exports. “National Mineral Resources Planning (2008-2015)” clearly stipulates that the exploration, exploration, and mining of specified minerals that are subject to protective exploitation by countries such as tungsten, tin, antimony, and rare earths will be subject to planning regulation, restrictions on exploitation, and strict access And comprehensive utilization, strict implementation of protective exploitation of the specific mining species of the annual total amount of control, is strictly prohibited over-planned mining and unplanned exports. By 2015, the total annual production of rare earths will be controlled at about 140,000 tons.
The corresponding adjustments continued in 2010. According to the figures provided by the Ministry of Commerce, in the rare earth mining sector, the scale of mining issued in 2010 was 25% lower than in 2009; in the smelting process, the amount of plans issued by the competent authorities was 23% lower than in 2009; the export link, the amount in 2010 The quota is 30,300 tons, which is nearly 40% less than the previous year.
“What we are demanding is a stable rare earth supply.” In an interview with our correspondent in early November, the Minister of Economic Affairs of the Japanese Embassy in the Ministry of Economy said that the Chinese government was genuine for the purpose of environmental protection because it was already It has been implemented for some time, but China suddenly reduced its exports of rare earths, which Japan does not want to see.
According to figures provided by him, Japan imports about 30,000 tons of rare earths each year, of which more than 90% comes from China. Not only Japan but also countries around the world rely on China's rare earths.
However, China Customs statistics do not support this statement. Customs statistics show that from January to September 2010, China exported 32,200 tons of rare earth in kind, which has exceeded the annual quota, including 16,000 tons exported to Japan, accounting for 49.8%, compared with the same period in 2009. Not only did it not reduce, it actually increased by 167%; it exported 62 million tons to the United States, accounting for 19% of the total, which was an increase of 5.5% year-on-year.
The warming up of rare earths is just a time when Sino-Japanese relations tend to be tense.
A person familiar with the rare earth work of the China Nonferrous Metals Industry Association told this correspondent that the problem of rare earth has largely become a political issue rather than a pure economic issue. In any case, China's adjustment and rectification of the rare earth industry still need to be carried out.
In May 2010, the Ministry of Industry and Information Technology publicly solicited opinions on the “Environmental Access Conditions for the Rare Earth Industry” on its website, among which the company’s production scale, process equipment, and waste discharges were all required.
According to the above-mentioned non-ferrous metals industry association, the current conditions for access to the rare earth industry and the development plans for rare earth industries are all being revised and formulated. At the same time, more than two years of rare earth associations are expected to speed up the establishment of the rare earth industry and coordinate the adjustment and rectification of the rare earth industry. jobs.
Next year, the policy is relatively stable. In 2010, China's export policy for rare earths received much attention in the light of a significant reduction in export quotas. The relevant information shows that there will be no major reversal of China's rare earth export policy next year.
On November 10, the Ministry of Commerce website announced the application conditions and reporting procedures for rare earth export quotas in 2011. The spokesman of the Ministry of Commerce, Yao Jian, stated that the relevant provisions of the application were basically the same as in 2010.
Regarding the number of rare earth export quotas for 2011, Yao Jian said that the specific figure is not a decision of the Ministry of Commerce and is still in the process, but he also said that as far as the Ministry of Commerce leaders said before, China will guarantee the needs of the international market.
In addition to export quotas, the Chinese government currently imposes export tariffs ranging from 15% to 25% on export rare earths, and lists rare earth ores and 41 rare earth products in the list of prohibited categories for processing trade. At the same time, the management of rare earth export companies has been strengthened. At present, 32 enterprises have obtained rare earth export qualifications, including 10 foreign-invested enterprises. These policies will continue next year.
Zhou Chengxiong, deputy director of the Consultation Research Center for Strategic Issues of the Chinese Academy of Sciences, recently stated that it should not interfere too much with administrative means, should improve the market mechanism, and make greater use of tax leverage to regulate the market. He proposed to abolish the export quota system and regulate the export volume of rare earths by substantially increasing the export tariff of rare earths.
In response to this proposal, Yao Jian told the correspondent that the focus of each policy is different, and each has its own function. It cannot simply say which one to choose.
He explained that quotas are the most effective method of total control. The WTO also regulates export tariffs. China's current implementation of export quotas, export tariffs, and export enterprise qualification management measures are in line with China’s WTO commitments, “especially In the current situation where rare earths need to be further managed, it is still necessary to apply several policies."
The aforementioned non-ferrous metals industry association also told reporters that reducing quotas and increasing export tariffs are all different forms. The specific method adopted depends on the development of the future situation. “At present, the country still believes that the way of export quotas is better. ."
Difficulties in resource export management In addition to rare earths, China had previously encountered similar trade conflicts.
In June 2009, the United States and the European Union appealed to the WTO dispute settlement mechanism regarding China’s export restrictions on nine raw materials such as bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus and zinc. The Chinese government’s response is also due to environmental concerns.
In fact, how to manage the export of resource products is a problem for global trade. The theme of the 2010 trade report of the WTO is the trade of natural resources. According to the report, the special nature of resource products determines the difference between them and other goods. Exporters of resource products often use measures such as export tariffs and quantitative restrictions. Importers have fewer restrictions, while other goods trade is the opposite.
Statistics show that 11% of the world's trade in resource products levies export taxes, while in other goods trade, this proportion is only 5%. In the existing export restrictions, the export of resource products accounted for 35%.
The report states that while the multilateral trade rules provide a free trade framework, these rules are not designed specifically for the resource sector and do not fully reflect the particularities of the resource sector. They also need to consider issues such as excessive use of resources and environmental externalities.
According to the relevant provisions of the WTO, in order to achieve reasonable policy objectives such as protecting resources and the environment, member states can take some necessary restrictive measures, including export restrictions.
In addition, the WTO rules are not binding on export restrictions. Cheng Dawei, an associate professor at the School of Economics at Renmin University of China, once told this correspondent that the main constraints of the WTO are import restrictions, giving members free space in terms of export restrictions, and does not stipulate obligations that must be fulfilled. This means that even if countries have a special annex to the WTO accession agreement to commit to the scope of export restrictions, the legal effect of these annexes is not strong.
In practice, many countries have different levels of restrictions on exports, and are not limited to the resource sector. The United States' export restrictions on China's high-tech fields are typical.
However, the WTO annual report also pointed out that trade policy on resource products may be a sub-optimal choice, and the best choice is often a domestic policy. “Domestic policies such as excise tax, production control, trade impact and trade restrictions are not much different. ."
The non-ferrous metal industry association mentioned to the correspondent that in order to maintain the development of the national economy, the country’s resources should be taxed. At the same time, the environmental pollution caused by mining should be compensated according to the principle of “who is responsible for pollution”. It is an internationally accepted rule. At present, China is not perfect in its domestic policy. "This should be the direction of our efforts."

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