China's Minister of Commerce Chen Deming and EU Trade Commissioner Karel De Gucht

China issues further quota for rare earth exports

China has issued a second batch of quotas for rare earth exports, effectively making up for previous curbs. 

The announcement came after Chinese Commerce Minister Chen Deming met with his EU counterpart Karel De Gucht to discuss rare earths and other issues between the trading partners.

The second batch of rare earth export quotas for 2011 is 15,738 tonnes, adding to the first round of 14,446 tonnes announced last year - bringing China's total  for the year to 30,184 tonnes, down slightly from 30,258 tonnes in 2010..

"We feel that a total of around 30,000 tonnes this year is a reasonable number given that Beijing probably does not want to cut the quota a lot, as that could bring more criticism from foreign countries," said an analyst at a foreign-invested fund in Beijing.

The quota announcement also followed the World Trade Organization's ruling last week that China had breached trade law by curbing exports of eight raw materials.

Europe and the United States claimed this meant China should also be forced to increase exports of 17 rare earths.

China, which accounts for some 97 per cent of global output of the minerals crucial to global electronics, defence and renewable energy industries, had slashed rare earth export quotas by 35 percent for the first half of 2011, building on previous quota cuts.

That move choked off global supplies, boosted prices and angered China's trading partners.

Beijing, which has defended its limits on exports on environmental and other grounds, said following the WTO decision that it would reform its exports of rare earths.

Chen said at a briefing with EU trade commissioner De Gucht that he was not concerned about any possible WTO challenge to Beijing's rare earths restrictions.

"The rare earth issue has not entered the WTO stage," he said. "I am not worried because we have already had some negotiation with the EU."

De Gucht said he was confident a negotiated solution could be achieved and would review China's new quotas, but added that China should publish such quotas further in advance of when they are imposed.

"The level of the quota is very important and also the predictability," he said.

Following the WTO's earlier ruling, De Gucht had said the EU, the United States and Mexico could consider legal action if China failed to cooperate.

"On rare earths, what we have been saying is that we want to see applied to rare earth materials the principles that have guided the WTO panel when making the judgement on the raw materials case," he said.

China expressed its intention to appeal the WTO raw materials decision, De Gucht said, adding that the rules on trade in raw materials would be clear by year-end.

In its raw materials ruling, the WTO panel said China's domestic policies fell short of demonstrating that its export duties on the materials, such as zinc and bauxite, were to curtail pollution or conserve exhaustible natural resources.

China has taken steps to consolidate and rein in its polluting rare earths industry, which may bolster its case if the raw materials ruling is used as a precedent in a similar challenge.

Claims by countries that its export curbs on rare earths threatened their economic and national security were "groundless", China argued, adding that its quotas fell within WTO regulations.

"China only intends to protect its environment and resources and has set tougher and tougher standards for irresponsible mining, and there is no intent to target any other countries," said Liao Yuling, a metals analyst with Huachuang Securities.

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