China broke international law when it restricted exports of coveted industrial raw materials, the World Trade Organization ruled on Tuesday, in a landmark case that may trigger new rows over growing global export curbs.
The WTO's trade judges said China illegally imposed a system of export duties and quotas on raw materials used in the production of steel, electronic goods and medicines, in a ruling expected to be challenged by Beijing.
"The panel found that China's export duties were inconsistent with the commitments that China had agreed to in its protocol of accession," the WTO said in a statement, referring to its legal panel.
"The panel also found that export quotas imposed by China on some of the raw materials were inconsistent with WTO rules."
The ruling coincides with growing anxiety among markets and policymakers about a trend among resource-rich countries to rein in exports of commodities — from wheat to iron ore and rare earth minerals — as supplies fall behind global demand.
The WTO issued an unusually stark warning about such export policies last month, saying they risked creating serious shortages.
The ruling hands a victory to the United States, the EU and Mexico, which took China to the WTO in 2009, saying export restrictions on eight different types of raw materials — including coke, bauxite and magnesium — discriminated against foreign manufacturers and give an unfair advantage to domestic producers.
The European Commission welcomed the ruling, saying it should serve to pressure China into dropping similar export curbs on rare earth minerals crucial for Europe's production of high-tech goods.
"This is a clear verdict for open trade and fair access to raw materials," EU Trade Commissioner Karel De Gucht said in a statement.
The EU's top trade negotiator said last month that the ruling would boost the bloc's ability to challenge export restrictions on rare earths.
FRESH CASES
European steel producers such as ThyssenKrupp and ArcelorMittal have watched the case keenly since steel production depends heavily on imports of Chinese coke, whose exports Beijing has reined in.
"There is a direct interest in ending restrictions," said Karl Tachelet, director of international affairs at European steel lobby Eurofer.
More broadly, the case creates a legal precedent that could make similar cases easier to lodge and win.
"This ruling will give the EU leverage to challenge export curbs by China, India and Russia on other raw materials – such as iron ore, scrap metal and alloys," Tachelet said.
China is expected to appeal against the ruling.
"Appealing is due process and a right for every WTO member. China is fully entitled to make use of this right," said a diplomat from a country involved in the claim.
