WTO preliminary ruling China's rare earth export restrictions violation quota system or the end

**Abstract** On March 26th, Geneva time, the World Trade Organization (WTO) released the report from its expert panel regarding the U.S., EU, and Japan’s challenge against China’s export control measures on rare earths, tungsten, and molybdenum. The ruling concluded that these export restrictions were in violation of WTO rules. Industry analysts suggest that this decision follows a series of nine raw material disputes, signaling a potential end to China’s long-standing export quota system for critical materials like rare earths. According to the expert panel’s findings, China’s export tariffs, quotas, and requirements for rare earth and molybdenum exporters do not comply with WTO regulations. The report also noted that China has failed to demonstrate that its rare earth export controls are necessary for resource conservation or that they are accompanied by domestic measures to limit production or consumption. The Chinese Ministry of Commerce stated that it is currently reviewing the expert panel’s report and will follow WTO procedures to address the case accordingly. Meanwhile, officials from the China Rare Earth Association indicated that they are analyzing the ruling’s implications and planning to develop countermeasures based on their assessment. Under WTO dispute settlement rules, China has 60 days to appeal the expert panel’s decision. A final ruling could take another three to four months. If the final decision confirms that China’s export restrictions are illegal, the country would be required to revise its policies. Interestingly, one of the three panel members supported China’s position, and several developing WTO members, including Russia as a third party, have provided evidence backing China’s stance. This gives China some leverage in the appeal process. However, experts believe the chances of completely overturning the panel’s conclusion are slim. It’s worth noting that just five years ago, China faced similar challenges at the WTO over nine raw materials, including bauxite and fluorite. In 2012, the WTO ruled against China’s export restrictions, dismissing its claims of environmental protection or supply shortages. Industry insiders suggest that the rare earth case may be part of a broader strategy by the U.S., EU, and Japan to challenge China’s overall export control system for strategic resources. “Rare earths may just be the beginning,” one insider said, warning that the real goal is to weaken China’s control over other key resources. Currently, China manages 22 goods under export quota licenses, including agricultural products, coal, crude oil, and some non-ferrous metals. After previous WTO cases, China removed export quotas for nine materials. If rare earths are next, the non-ferrous metal sector could enter a new era without quotas. According to Tu Xinquan, vice president of the China WTO Research Institute, this ruling presents a major challenge to China’s export quota system, which has been in place since the 1980s. He emphasized that even after this case, more disputes over strategic resources are likely. China must rethink its policies and prepare strategically for future challenges. In response, China has shifted its focus from export controls to production management. Authorities have been cracking down on illegal rare earth mining and enforcing stricter environmental and industrial standards. The government has also launched initiatives to regulate the entire rare earth supply chain. Some industry observers worry that this ruling could weaken China’s ability to manage other scarce resources in the future. “Once this precedent is set, we may lose the ability to protect other critical materials,” one official said. He Weiwen, a researcher at the China WTO Research Association, believes the ruling is more symbolic than practical. With changes in the global rare earth market, China’s export quotas are no longer a major factor. The real challenge lies in domestic regulation and sustainable development. He also suggested that China should consider proactive strategies, such as challenging U.S. energy exports through legal means, if properly prepared. Overall, the ruling marks a turning point for China’s export policy and highlights the need for a more balanced and sustainable approach to managing strategic resources.

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