China defends rare earth export restrictions

China on Tuesday defended its restrictions on exports of rare earths, as Washington prepares to launch a fresh trade suit against Beijing at the World Trade Organization prompted by these quotas. The Asian nation produces more than 95 percent of the world’s rare earths -- critical to making everything from iPods to low-emission cars -- and its export quotas on the elements have triggered an outcry among major trading partners. U.S. President Barack Obama is expected to announce later Tuesday that the United States -- with the European Union and Japan -- will bring the suit at the WTO, in what could fuel election-year trade tensions with Beijing.“Based on environmental protection and in order to achieve sustainable development, China carries out management policies over the export of rare earths,” foreign ministry spokesman Liu Weimin said. “We believe such measures comply with WTO rules.” Beijing has set its 2012 export quota for rare earths -- which have a wide range of applications in the military and technology sectors in particular -- at around 30,000 tons, roughly the same level as 2011. Critics say the restrictions are aimed at driving up global prices and forcing foreign firms to relocate to the country to access them. But Beijing says the measures are necessary to conserve the highly sought-after natural resource, limit harm to the environment from excessive mining and meet domestic demand. China’s official Xinhua news agency on Tuesday hit out at Obama’s planned announcement, saying the suit was “likely to hurt bilateral trade ties and trigger a backlash from China instead of settling the rift.” It is rash and unfair for the United States to put forward a lawsuit against China before the WTO, which may hurt economic relations between the world's largest and second-largest economies,” it said in a commentary. “A better choice for the United States would be sitting down with China face-to-face and solve the problem through negotiations instead of making it an internationalized issue.” Liu said China would continue to supply rare earths to the international market, and pointed out that Beijing had also put restrictions on mining the materials within the country. It has for instance stopped issuing new licenses for prospecting and mining rare earths and has also adopted production caps, in what it says is a bid to protect the environment. He also urged other countries with rare earth resources to “actively develop and explore” these and “share the responsibility for supplying rare earths.” Obama, facing fierce election-year pressure over China from Republican opponents, has repeatedly called on Beijing to play by the “rules of the road” as it rises to become one of the dominant players in the global economy. He has already launched a new enforcement center to more aggressively challenge “unfair” trade violations, including by China. In other disputes, Washington has accused China of artificially undervaluing its yuan currency in order to boost its own exports, hurting U.S. manufacturers and hobbling the economic recovery. But China defends its exchange rate regime, saying it is moving gradually to make the yuan more flexible.