March 20, 2014 5:59 am JST

WTO panel to rule against China's limits on rare-earth exports

TOKYO -- The World Trade Organization's dispute resolution panel is expected to rule that China's export restrictions on rare earths and other key minerals violated trade rules.

     The panel investigated the joint complaint filed by the U.S., Japan and the European Union two years ago. WTO rules prohibit limiting export volumes unless the purpose is to preserve natural resources or protect the environment. The panel is likely to conclude that China is giving preferential treatment to the domestic industry.

     In a report on the ruling, to come out as early as Monday, the panel will likely suggest that China take alternative measures, such as limiting domestic production, if the restrictions are aimed at preserving resources. It will also conclude that China's export taxes stand counter to WTO rules, which allow such measures only for environmental protection.

     The panel's decision is the first of a series of dispute settlement processes under the WTO.

     China is expected to appeal the ruling within 60 days, which will then be reviewed by the appellate body for dispute settlement over a period of up to 90 days. The possibility of the ruling being reversed is considered unlikely. The final decision on the case will come around summer.