GENEVA/WASHINGTON (Reuters) - China has lost a dispute at the World Trade Organization over restrictions on its exports of rare earths and metals, handing Europe and the United States a victory over what they see as Beijing's unfair trade practices.
China produces more than 90 percent of the world's rare earths, which are used in a wide range of applications in sectors like renewable energy, telecommunications and defense.
The United States, European Union and Japan complained export restrictions on the highly prized commodities gave Chinese companies in key high-tech sectors an unfair competitive edge, while China said limits were needed to prevent over-mining.
The European Commission said the WTO ruling on rare earths, as well as the metals tungsten, and molybdenum, meant China could not justify export limits for environmental protection or conservation policy.
"Neither the complainants nor the panel contest China's right to put in place environmental and conservation policies," the European Commission said.
"However, as unequivocally confirmed by the WTO panel, the sovereign right of a country over its natural resources does not allow it to control international markets or the global distribution of raw materials."
The United States said the export limits allowed China to artificially increase world prices for raw materials crucial to make products like hybrid car batteries, wind turbines and energy-efficient lighting, while artificially lowering prices for Chinese producers.
"China's decision to promote its own industry and discriminate against U.S. companies has caused U.S. manufacturers to pay as much as three times more than what their Chinese competitors pay for the exact same rare earths," U.S. Trade Representative Michael Froman said in a statement.
Any of the parties in the case can appeal within 60 days.
China, which capped rare earth production at 93,800 tones in 2013, has said it no longer wants to pay the environmental costs of supplying the vast bulk of the world's rare earths.
China's Ministry of Commerce said the head of its treaty and law department welcomed the WTO's recognition of its efforts to conserve resources and protect the environment, but regretted that the panel found China's export duties, quotas, and quota administration breached WTO rules.
"China believes that these regulatory measures are perfectly consistent with the objective of sustainable development promoted by the WTO," it said in a statement, adding that China was currently assessing the WTO report.
(Reporting by Tom Miles and Krista Hughes; Additional reporting by Robin Emmott in Brussels; Editing by Andrew Heavens and Chizu Nomiyama)
