US, EU and Japan challenge China on rare earths at WTO

The US, Japan and the European Union have filed a case against China at the World Trade Organization, challenging its restrictions on rare earth exports.

US President Barack Obama accused China of breaking agreed trade rules as he announced the case at the White House.

Beijing has set quotas for exports of rare earths, which are critical to the manufacture of high-tech products from hybrid cars to flat-screen TVs.

It is the first WTO case to be filed jointly by the US, EU and Japan.

They argue that by limiting exports, China, which produces more than 95% of the world's rare earth metals, has pushed up prices.

The co-ordinated complaints are the first step in a process that could ultimately lead to sanctions against China.

"We've got to take control of our energy future and we cannot let that energy industry take root in some other country because they were allowed to break the rules," Mr Obama said in Tuesday's Rose Garden press conference.

"If China would simply let the market work on its own we would have no objections. But their policies currently are preventing that from happening. And they go against the very rules that China agreed to follow."

In the press conference, Mr Obama also said his new trade enforcement unit - which he established last month, with China the primary target - was ramping up its operations.

"When it is necessary, I will take action if our workers and our businesses are being subjected to unfair practices," Mr Obama added.

Beijing has denied the allegations in the WTO case, saying that it enforced the quotas to ensure there was no environmental damage caused due to excessive mining.

China's Industry Minister, Miao Wei, told state media agency Xinhua that the country was "actively preparing to defend ourselves" against the WTO complaints and denied the quotas were trade protectionism.

"We feel sorry for their decision to complain to the WTO," Mr Miao said.

Chinese foreign ministry spokesman Liu Weimin said: "We think the policy is in line with WTO rules.

"Exports have been stable. China will continue to export, and will manage rare earths based on WTO rules."

China controls almost the entire world supply of rare earths

The filing focuses on 17 rare earth minerals which are essential for making products such as smart phones and camera lenses, as well as many renewable energy devices.

The rare earth complaints follow a WTO ruling earlier this year in favour of the EU. It found China had illegally restricted exports of other materials, such as bauxite, zinc and magnesium.

"Despite the clear ruling of the WTO in our first dispute on raw materials, China has made no attempt to remove the other export restrictions," said EU Trade Commissioner Karel De Gucht.

"This leaves us no choice but to challenge China's export regime again to ensure fair access for our businesses to these materials."

The EU imports 350m euros ($458m) of rare earth minerals from China each year.

The US trade representative's office argues that quotas are one way that China engages in trade protectionism on rare earths, including export duties and pricing requirements.

Welcoming Chinese Vice-President Xi Jinping to the White House last month, Mr Obama warned that China must play by the same rules as other major powers in the world economy.