The Appellate Body of World Trade Organization (WTO) confirmed on 7 August 2014 that China’s export restrictions on rare earths, molybdendum and tungsten are in violation of WTO rules.

This Appellate Body report essentially upheld the previous Panel report back in March 2014.

The Complaint was brought together by EU, US and Japan in March 2012. They argued that export duties and quotas disadvantaged foreign industries by artificially increasing China’s export prices. In addition, they also claimed that by artificially lowering China’s domestic prices for raw materials, local industries are put at a competitive advantage. In turn, foreign producers are put under pressure to move their operations and technologies to China.

China currently produces more than 90% of the world’s rare earth minerals or metals, which are used in various industries including, among others, automotive industry, machinery manufacturing, chemicals and modern technology.

As a consequence of this ruling, China is now obliged to bring its measures to conformity. EU Trade Commissioner Karel De Gucht said that, “The ruling sends a clear signal that export restrictions cannot be used to protect or promote domestic industries at the expense of foreign competitors.”