The World Trade Organization (WTO) recently made headlines over its decision to notify the Chinese government that it is in violation of international trade rules regarding the country’s raw materials export restrictions covering bauxite, zinc, yellow phosphorus and six other industrial minerals.

The case – brought about by the U.S., European Union, and Mexico in 2009 – upheld an the initial WTO ruling, and constitutes the supra-national body’s final holding on China’s policies.

Implications for rare earths?

Rare earth elements (REEs) – the group of 17 elements without which we would not have our smartphones, tablets, and flat screen TVs – were not at issue in the WTO’s decision. While the WTO does not treat prior rulings as precedent, some in the international trade community were quick to claim a linkage in the WTO’s logic to China’s export controls on rare earths.  European Union Trade Commissioner, Karl De Gucht, had this to say in a press statement:

China now must comply by removing these export restrictions swiftly and furthermore, I expect China to bring its overall export regime – including for rare earths – in line with WTO rules.

Supra-Nationalism versus Sovereignty

In a recent post for RareMetalBlog, American Resources principal, Daniel McGroarty, expressed skepticism that China would accept this linkage, citing what he called the “limits of law in cases of sovereignty,” pointing out that China’s REE stranglehold is neither a “force of nature” nor a “fact of geology.”

China may have a rare earth production monopoly, McGroarty explained, but it only possesses 36 percent of the world’s known reserves. He noted that compelling a sovereign nation to export what other nations could arguably explore and develop themselves would be a “tough case to make in the court of public opinion.”

Chinese officials have said they will adhere to the WTO ruling, but exactly how far they would go remains in question. Already, Reuters has pointed to a loophole in the ruling that allows for leaving export quotas in place for environmental reasons — a rationale frequently mentioned by Chinese authorities as they consolidate their rare earths mining sector.