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China may appeal WTO ruling on resources

China is likely to appeal a World Trade Organization (WTO) ruling against curbs introduced on the exports of raw materials.

China's export restrictions on nine raw materials are inconsistent with its obligations, according to a WTO expert panel ruling issued on Tuesday.

The panel sided with complaints filed by the United States, the European Union and Mexico, saying that China was driving up prices for raw materials, such as coke, bauxite and zinc, by introducing export duties and quotas.

The Ministry of Commerce expressed regret over the ruling on Wednesday, and said that the WTO findings "are not justified pursuant to the general exceptions relating to the conservation of exhaustible natural resources and the protection of human health", Xinhua News Agency said.

The ministry said that measures introduced by China, covering some raw materials, aim to protect the environment and nonrenewable resources.

"Although these measures have an impact on domestic and international users, they are in line with the objective of sustainable development promoted by the WTO, and they help induce the resource industry toward healthy development," it said in a statement.

According to WTO dispute settlement rules, an appeal can be made to the appellate body within 60 days of the report's distribution. The legal process can take years.

The US, the EU and Mexico brought the case to the WTO in 2009.

Huang Dongli, a researcher of the Institute of International Law affiliated to the Chinese Academy of Social Sciences, said China can justify restrictive measures based on "conservation of exhaustible natural resources".

The materials affected by the limits are mostly used in producing aluminum, steel, alloys, ceramics, mobile phones and semiconductors.

China strengthened its resource management in recent years to protect the environment and prevent depletion.

Some analysts raised the specter that the US and the EU could use the ruling to launch action against export curbs on rare earths.

Jing Yunchuan, a partner at King & Partners, a Beijing-based law firm, said that the WTO ruling may encourage trading partners to take China's restrictions on rare earths to the WTO.

Karel De Gucht, EU trade commissioner, called for discussions.

"I hope that as a result of this decision by the panel that the Chinese will be ready to discuss thoroughly with us how to proceed," he said, according to Reuters.

He called for a negotiated settlement with Beijing to avoid a full-fledged trade war, and vowed to address the issue during a visit to Beijing next week.

Zhong Shan, deputy commerce minister, said on Wednesday that the country will continue to improve its regulations covering the exports of rare earths according to both Chinese law and WTO regulations.

"Rare earths are nonrenewable resources of strategic importance. Improving the exports of minerals will help the country protect the environment and accelerate the industry's restructuring," he said at a conference on rare earths in Baotou, the Inner Mongolia autonomous region, according to the ministry's website.

Countries critical of export curbs on rare earths "should come to China's southern provinces, the area with the largest deposits of rare earths, to see the environmental damage due to overexploitation," Zhang Anwen, deputy secretary-general of the Chinese Society of Rare Earths, said.

China, which sits on just 30 percent of global reserves, produces more than 90 percent of the world's rare earths.

Wang Caifeng, a former official with the Ministry of Industry and Information Technology, who is also in charge of establishing a rare earths industrial association, said that stringent measures were introduced to protect resources from being overexploited rather than limiting exports.

"Those countries, such as the US and Australia, which also have sizable reserves of rare earths, stopped production because of lower prices from overproduction in China. How can they blame China for decreasing exports?"