Behind the WTO Rare Earth Dispute between China and Japan

Behind the WTO Rare Earth Dispute between China and Japan

Sino-Japanese Rare Earth War

On March 26th, the World Trade Organization announced the report of an expert group in the United States, the European Union, and Japan prosecuting the export management measures for rare earth, tungsten and molybdenum related products in China, and ruled that the export management measures of the Chinese products involved in the case were in violation. This defeat was not abrupt because, since two years ago, the prediction of the outcome of this rare earth war has been repeated numerous times. Even lawsuits with basically the same content, we have lost one in 2009. The last time we were forced to open nine kinds of industrial raw materials such as bauxite and coke. This time, I don't know if we can use the five major rare earths that we set up in the appeal period to make up for it. I do not know whether we can successfully say in the 14th year of joining the WTO that we do not have to pay tuition fees.

"Behavior across the board"

The battle of rare earth was officially started two years ago.

On March 13, 2012, the Ministry of Economy, Trade and Industry of Japan held that China restricted the export of three kinds of rare earth, tungsten, and molybdenum materials from violating relevant WTO regulations and requested the United States and the United States to file a complaint with the WTO. "Since the moment of the Japanese complaint, the Chinese government has already lost the order because the violation is an established fact." Zhang Hanlin, director of the China WTO Research Institute of the University of International Business and Economics, told reporters at the Chongqing Youth Daily that this controversy about the rare earth started from the beginning. That moment has already lost.

Why lose? As early as March 20, 2012, the "Legal Evening News" published the analysis article of Tang Yin of the Academy of Social Economics and Strategy. The article believes that the focus of this complaint is mainly on two aspects: First, China’s laws on restrictions on export of rare earth materials are in conformity with Article 20(g) of the GATT of WTO provisions (GATT must not prevent members from implementing “protecting available natural resources”. The relevant measures are implemented simultaneously with the restriction of domestic production or consumption measures.) Second, whether China's export tariffs are in compliance with the exceptions.

According to the analysis, because China has not adopted corresponding restrictions on the extraction and consumption of rare earths in China, this aspect may become China's weakness in the lawsuit. In subsequent defenses, evidence should be submitted to the WTO stating that the corresponding domestic restrictions on production or consumption were taken. On the aspect of export tax, if the WTO needs to recognize "special exceptions," China must meet procedural requirements, such as "advanced consultations with affected members." However, it is clear that China has not yet performed these procedures. Finally, the article concluded: "Under the premise of lack of cooperation and communication, the method of raising tariffs alone is undoubtedly unjustified under the current WTO framework."

Two years later, when the report of the WTO expert group was released, its main reasons and conclusions were strikingly consistent with Tang’s analysis.

In the same year, as with Tang Ye, the use of regulations to analyze rare earth disputes, as well as "Japan's Economic News" editorial board Goto Kaoru. Although Goto used the terms of the article to analyze "China's export restrictions on rare earth exports" in the article, its focus has been on inciting national sentiments. Using the “oil shortage” experienced by Japan in the 1970s to insinuate the rare earth dispute, the entire incident was misrepresented to the level of “economic warfare”.

"Low level of negotiation"

There are prophets who explain the rules, explain the terms, and there are prophets who can hardly restrain personal emotions.

On March 21, 2012, Chinese economist Lang Xianping published a prediction microblog with strong personal sentiments: “This incident shows that the level of understanding of the WTO rules among the experts and officials of our relevant units is low. We are shocked that we will only publish statements based on populism after the losing of the case, thereby obscuring the dereliction of duties of officials.26 China was prosecuted after China's accession to the WTO, and all of them lost the case.The main reason is that competent officials and experts do not understand the WTO rules. The regulations ban quotas, but we openly allocate quotas for rare earths.The WTO stipulates that the government can not subsidize commercial R&D. The EU’s US subsidies to Airbus Boeing only dare to hide in the name of scientific research. All over the world, we have openly subsidized 49.8 billion yuan for domestically-made large aircraft. Once it is exported, it will be defended."

Lang Xianping predicted the rare earth dispute and also predicted that there was no "aircraft defendant". The director of the Japanese Institute of Corporate Culture, Chang Sheng and Shou Liang, is more inclined to predict "the failure of China's rare earth from export to policy."

On September 7, 2012, Sheng You Shouliang published an analysis article enumerating eight reasons that "China's rare earth disputes will lose." The analysis not only involves the terms and rules of the WTO, but also utilizes changes in global rare earth mining, Japan's declining trend of rare earth imports, innovation and development of rare earth alternative technologies, and extravagance hopes that "China's rare earth exports will face many difficulties in the future."

It hints that China will lose lawsuits, lose the economy, and lose the policy. The article is plausible and speculative. Relaying this view, there are the US magazine "Connected" on May 11, 2012 and "Forbes" on June 21, 2012. “Chinese rare earth will completely lose its advantage within five years.” The article quoted the prediction of John Cather, the US mining analyst, that the US’s armament manufacturing is very dependent on China’s rare earth, but with the emergence of new mining and alternative technologies, China’s rare earth will Loss of advantage.

"A mistake commits another crime"

With the WTO chairing the controversy, the two sides launched oral debates and hearings in February and June 2013. Various "predictions" about losing the case began to join the important item of "WTO prejudgment".

After the defense, on October 10, 2013, Stewart & Co., which was responsible for US prosecution, first pulled out the WTO expert group. Firstly, the case was linked to the 2012 case of “Limiting the export of nine types of raw materials that violated regulations” and pointed out that “At that time, China did not take relevant actions after the losing of the case, nor adjusted its related policies. Therefore, China’s overall policy is still not In line with the WTO expert panel review of export restrictions."

Then, the data was used to refute the arguments put forward by China one by one, emphasizing that “China does not restrict exports in order to protect the environment, but to protect related domestic industries and damage foreign producers”. Finally, according to the exception clause submitted by China, the Stewart Law Firm pointed out that "the date of China's implementation of the policy does not have early guidance (can be regarded as invalid)."

After the United States released its interpretation, many Japanese media became disinfected after October 24, 2013. “The WTO has issued an interim report and China is more likely to be 'behaviored'.” Japan’s large-scale news website, current affairs.com, Japanese newspaper “Yomiuri Shimbun” and “Nihon Keizai Shimbun”, which have a circulation of 10 million, have successively speculated that “China’s defeat has been set”.

However, according to the WTO rules, the content of the hearings of the Expert Committee and the periodic conclusions are forbidden. At that time, the British Financial Times, the US International Financial Times, the New York Times and other media all confessed that "the WTO has not made any comment, and the WTO refuses to comment on the existence of an interim report that Japan claims." However, in these articles, there are always hidden guiding cues such as "unwilling to be named officials say that the results of the WTO study should be favorable to the United States, Japan and Europe" and other sources.

More people worry about the world, after the guiding cues, they "advised" China to prepare for losing the lawsuit as soon as possible.

TrendForce, the global market research institute, and the Japan Metal Research Bureau both cited the view of “anonymous industry insiders” and suggested that China strengthen the control of rare earth cutting as soon as possible. Because "after the loss of China's lawsuit, once the quota is released, indiscriminate use, smuggling and other issues will become increasingly serious. By then, China will adjust its export policy and will usher in the peak of managing rare earth companies."

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