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China defends rare earths quotas

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China is defending its export controls on rare earth minerals after a government move to slash export quotas on rare earths sparked trade concerns, saying they are in line with World Trade Organisation rules.

China, which produces about 97 percent of the global supply of the metals used in the production of numerous high-tech products, cut its export quota by 35 percent for the first half of 2011 compared with a year earlier, saying it wanted to conserve reserves.

Foreign Ministry spokeswoman Jiang Yu reiterated at a regular news briefing in Beijing that the quotas were necessary for environmental protection.

"This accords with relevant WTO rules," she said. "In the future, China will continue to supply rare earths to the international market and will take effective management steps over their export in accordance with WTO rules."

The foreign ministry does not set China's policy on rare earths.

China has refused U.S. requests to end export restraints on rare earths that have alarmed trade partners. The U.S. Trade Representative office said last week that Washington could complain to the WTO, which judges international trade disputes.

The rare earths issue adds to the growing list of trade-related disputes between China and the United States, which has accused China of poorly enforcing intellectual property rights and for its indigenous innovation policies that discriminate against foreign companies.

Prices have surged for rare earth minerals since the authorities in Beijing slashed exports by 40 percent this summer.

Beijing said the curbs were aimed at ensuring supplies for the Chinese clean energy companies it is trying to promote internationally, but it has also said its dominance as a producer should give it more control over global prices.

A European Commission spokesman said the European Union had noted the latest quota figures and expected China to respect recent assurances of a guarantee of rare earth supplies to Europe.

Wind turbines and hybrid cars are among the biggest users of rare earth minerals, a little-known class of 17 related elements that analysts say are facing a global supply crunch as demand swells. The minerals also are used in some weapons systems.

U.S. makers of high-tech products such as Apple Inc.’s (AAPL-Q)  iPads and various Japanese companies have been scrambling to secure reliable supplies of the minerals outside of China as Beijing steadily reduces export allocations.

Beijing has long insisted that other countries should share the responsibility for developing rare earths.

"The international community has a joint responsibility to ensure the supply of rare earths," Jiang said. "Other nations that have rare earth resources should proactively develop and make use of them, to jointly shoulder responsibility for global supplies."

China has cautioned that it has not decided on quotas for the second half of the year.

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