Last spring, the United States asked for WTO consultations with China regarding China's export restraints on rare earth metals as well as tungsten and molybdenum.  That is how WTO disputes begin.  Following the consultation period, a panel to hear the dispute was convened, and now the panel seems to have come to some conclusions.  Word of those conclusions began appearing in press reports at the end of last month. 

Assuming those reports are accurate, China has lost this case, at least in this first round.  Mei Xinyu, whose assessment of the situation is highlighted above, is a policy analyst with China's Ministry of Commerce.  His comments appeared in an October 30 Wall Street Journal article by Chuin Wei Yap.  The article had the interesting headline, "Beijing Says WTO Rules Against China in Rare Earth Dispute."  

Other reports we have seen on these same developments have highlighted China's displeasure at the fact that this report has been leaked prematurely.  There is some irony there, but no real inconsistency.  At this point, the report is not final.  The final version won't be issued until after the interested parties have had a chance to read and comment on the current draft.  In addition to the United States and China, there are a number of "third parties," and presumably they will get a chance to weigh in as well.  The third parties are Brazil, Canada, Colombia, the European Union, the Republic of Korea, Norway, Oman, the Kingdom of Saudi Arabia, Chinese Taipei, Vietnam, Argentina, Australia, Indonesia, Turkey, Peru, and the Russian Federation.
 
All that said, the parties should have a final report by the end of this month.  And early next year, after the translations have been made etc. etc., the rest of the world will have an official published report.

Rare Earths. To review, very briefly, rare earths are those 17 elements in the periodic table - from scandium to lutetium - that have become all but indispensable to the modern world.  They are in everything from wind turbines, to missiles, to cell phones.  And for a while, it seemed, China had a lock on the world's supply, not of the raw materials but of the mined, refined, and ready for industrial inputs needed by hungry global supply chains.  In 2010, she bluntly drove that point home when, following a flare up in the dispute over the Senkaku (Diaoyu) Islands in the East China Sea, China cut off Japan's supply of rare earths from September to November.
 
China, Raw Materials, and the WTO.  This is the second major WTO case against China's policies of restricting the export of key raw materials.  The first one focused on bauxite, coke, fluorspar, and several other materials.  It ran from June 2009, when the U.S. asked for consultations, to February 2013, when the WTO's membership - sitting as the Dispute Settlement Body - adopted the report of the Appellate Body.  (Yes, China lost in the first round, the Panel Report, and appealed.)

This seems the right place to consider the question, What does it all mean?  Opinions vary.  It is certainly still the case that China is the world's dominant supplier of rare earths.  And so, logically, edicts from the WTO about her treatment of that position and of her customers would have meaning.  It does, but maybe not as much so as it might have in the past.  That is because other supplies - notably in California and Australia - have come on stream in the last few years.  In addition, users of rare earths have managed to pare back their needs.  And both of these developments are reflected in lower prices.

Keith Bradsher of The New York Times wrote an excellent article last month on China's rare earths policies.  The mining and refining of rare earths is a dirty business, and Mr. Bradsher's piece focused on the environmental clean-up processes now underway in China.  He also addressed the issue of falling prices, however.  Indeed he ended his article with a quote from a professor at Curtin University in Perth, Australia, Dudley Kingsnorth.  Professor Kingsnorth, a former mining executive, didn't attach a lot of significance to the WTO's leaked decision on rare earths.  "If it were decided five years ago, it might have had an impact," he said.
 
Professor Kingsnorth is an expert in this area, and we are not.  And yet we think he understates the significance of the WTO's ruling.  The Chinese may have lost some market power with respect to rare earths, but they still have a lot.  And, it would seem that China agrees.  Otherwise, Mr. Mei's suggestion that China will find "other means to control" exports would be meaningless.  It may be offensive, but it is not meaningless. 

Then too, there are principles at issue here was as well.  Stare decisis - the notion of controlling precedents - is, formally, not part of the WTO's procedures.  So each case is new.  And in the view of one very keen observer, it is likely that there will be several more, or should be.  Terence Stewart and Ping Gong of the law firm of Stewart and Stewart posted an article on this issue on October 10.  In it they explained the rationale for China's export restraints and anticipated a likely third round of WTO cases.

"China's export restraint measures," they wrote, "are designed to and do tilt the playing field in favor of China's home production base."  Like Mr. Mei, Messrs. Stewart and Gong do not expect China to fold its tent on this issue, and, as they also note, China uses similar policies with respect to other resource exports.  In anticipation of the panel report on rare earths, they wrote: