August 28, 2014 12:00 am JST

Stem the spread of export curbs on natural resources

The World Trade Organization, ruling on a dispute over China's export restrictions on rare earth metals and other mineral resources, has almost entirely acknowledged the claims of Japan, the U.S. and the European Union. The final decision, published on Aug. 7, sealed China's defeat in the case. The Japanese government should take this opportunity to stem the spread of natural resource export curbs by appealing to other countries to share the understanding that such steps violate international rules.

     China boasts a dominant share of the global production of rare earths. The country reduced export volumes in steps, and the collision of a Chinese trawler with Japan Coast Guard vessels near the disputed Senkaku Islands, known as Diaoyu in China, in the autumn of 2010, prompted Beijing to bring exports of rare earths to Japan to a standstill for a time.

     In the case brought to the WTO, China argued that its limits on exports had been meant to protect the country's environment and conserve natural resources. But the Geneva-based watchdog for international commerce has concluded that the move was a policy measure China arbitrarily took to secure preferential use of those materials by Chinese industries.

     China's export restrictions on rare earths cannot be justified, because they were a step taken in order to capitalize on its position as the effectively monopoly supplier, and were intended to use rare resources as a diplomatic trump card. So it stands to reason that China has lost the case.

     Rare earths are not the only resource in which China has a dominant share. It also leads the markets for tungsten and molybdenum -- both target commodities of the export restrictions referred to in the WTO ruling -- as well as antimony. They are all indispensable materials used for production of specialty steel products and synthetic resins. The hope is that, in response to the WTO ruling, China will practice fair trade, as expected of a WTO member whose economy ranks second in the world.

Priority on domestic supply

Unfortunately, moves to place tighter controls on exports are spreading among other resources-rich countries than China. The Indonesian government has placed a total ban on exports of raw minerals, such as nickel ore, based on its new minerals and coal law, which took effect in January this year, with the aim of promoting Indonesian industries.

     South Africa, which has the lion's share of production of platinum and other items, is seeking to implement a policy of supplying "strategic minerals" for domestic consumption in a certain quantity and at set prices on a priority basis.

     Indonesia's ban on exports of unprocessed minerals is an issue about which the Japanese government could consider filing a complaint with the WTO. Before taking such a step, however, it might well ask the Indonesian government to rethink the policy. In doing so, Tokyo should explain to Jakarta that export restrictions intended to give an unfair advantage to the country's own industries would not be accepted in the international community. It might also point out that the export curbs put in place by China have led to a fall in global demand.

     Meanwhile, it will be essential for the Japanese, based on the lessons learned from the rare earths crisis, to push forward with the recycling of resources that are supplied by a limited number of countries, and to promote the development of new technologies for reducing their consumption.