China Rare Earths Safe from WTO Ruling on Export Curbs

"The decision of the appellate body is a huge victory for the United States," said Michael Silver, chief executive of American Elements, a U.S.-based rare earth processor. "It confirms the existence of the two-tiered price structure that has caused so much concern."

Follow us

EU Trade Commissioner Karel De Gucht said the decision would force China to drop export restrictions for the materials mentioned in the case and for rare earths.

But while China might be forced to tweak some of its export policies, analysts said Beijing's strategy to restrict rare earth supplies and control prices would likely remain unchanged.

"It is still too early to say what the impact will be but I can't see it having a big impact on prices -- the main issue will still be supply and demand," said Vivian Pang, an analyst with the Asian Metal consultancy in Beijing.

China controls 95 percent of global rare earth supplies -- a group of 17 elements used in new industries like renewables and hybrid cars -- and its dominance means that it is in a strong position to disregard WTO rulings if it so wishes.

The United States, European Union and Mexico had all launched WTO legal cases in 2009, challenging China's right to restrict raw material exports.

"The question is whether China will actually stop or at least reduce export taxes," said Silver. "I expect they will, so they remain WTO members in good standing."

China's Ministry of Commerce said on Monday that it "deeply regrets" the ruling but would comply.

Tu Xinquan, associate director of the China Institute of WTO Studies, said Beijing was likely to have to adjust its policies in order to comply -- but its overall strategy need not change.

"There are other ways it can meet its objectives," he said.