On June 27, the European Union, the United States, and Japan jointly requested the establishment of a dispute settlement panel at the World Trade Organization (WTO) over alleged Chinese export restrictions on rare earths, tungsten and molybdenum.

U.S. Trade Representative Ron Kirk said it is vital that U.S. workers and manufacturers obtain fair and equal access to raw materials like the rare earths that China specifically agreed to release when it joined the WTO.

Zhou Shijian, senior researcher at the U.S.-China Relation Research Center of Tsinghua University, told China Business News that "This indicates they cannot reach a compromise and therefore enter litigation proceedings."

The three countries requested consultations with China regarding the export restrictions on various raw materials, including rare earths, last March. Formal consultations were held in April but failed to deliver a solution.

China holds abundant reserves of rare earth metals, a group of 17 elements that are vital for the manufacturing of several high-tech products, including cell phones, wind turbines, electric car batteries and missiles.

According to well-informed sources, the EU, United States and Japan asked China to cancel its rare earth export quota and tariff policies, but China refused to do so. Sources said China's policies help protect its domestic resources and environment. Over the past decades, China's number of rare earth resources has declined enormously and the environment has suffered.

Due to high tariffs, the rare earth prices differ largely in domestic and overseas areas, so the current smuggling of rare earths should be taken very seriously.

The country has supplied over 90 percent of rare earth products on the global market, but its reserves only account for about one-third of the world's total. The disorderly withdrawal of rare earths has been blamed for causing environmental damage in rare-earth-rich regions across China.

EU, the U.S. and Japan have requested a special meeting of the Dispute Settlement Body to be held on July 10, to consider their requests regarding panel-examination of China's exports measures on rare earths, according to the WTO website.

China lost a WTO - appeal in January after the U.S., EU and Mexico launched cases regarding the nation's export restraints on nine raw materials, including zinc, coke and magnesium.

Zhou Shijian said China should not expect anything good coming from the trade dispute. Government and enterprises should make adjustments and arrangements in advance. From a WTO regulatory perspective even if resource protection is a justified reason, quota and tariff can still cause frictions.

Zhou recommends China goes back to to square one and starts collecting high resource taxes as well as environmental protection taxes. In doing so, the mere selling of resources will not generate much money, which will in turn encourage rare earth enterprises to pour more investment into technologies associated with rare earths.

Experts have told China Business News that China is trying to win time in order to regulate and develop its rare earth industry. International disputes usually take 2 to 3 years to be resolved, so China still has time to improve the industry and its competition power, as well as crack down on illegal mining and pollution.

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