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China Has Legal, Moral Right To Curb 'Rare Earth,' Paper Says

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CHINA RARE EARTH
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BEIJING (Reuters) - China is well within its rights, legally and morally, to limit rare earth exports, argued an article in Chinese state media on Thursday, days after the World Trade Organization ruled against China on its curbs of raw materials exports.

The People's Daily, the mouthpiece of China's ruling Communist Party, said claims by countries that China's export curbs on the minerals threatened their economic and national security were "groundless."

"It's not that other countries don't have their own supplies, it is just that they have hidden them away," it said.

"China's handling does not violate international rules and is not contrary to its WTO accession promises," the paper said.

The WTO ruled on Tuesday that China had violated its rules when it curbed exports of coveted raw materials such as bauxite, coke and magnesium used in the production of steel, electronics and medicines.

That ruling, initiated by complaints filed by the United States, the European Union and Mexico in 2009, was seen as a possible precedent for a future case on China's rare earth export quotas.

In its ruling, the WTO panel said China's domestic policies fell short of demonstrating that its export duties on raw materials were to curtail pollution or conserve exhaustible natural resources -- reasons also offered for its rare earth quotas.

China is widely expected to appeal the ruling. It has taken steps to consolidate and rein in its polluting rare earths industry, which may bolster its case should rare earth quotas be the target of a similar WTO challenge.

The central government slashed rare earth export quotas by 35 percent for the first half of 2011, building on previous quota cuts. That move choked off global supplies, boosted prices and angered China's trading partners.

China produces 97 percent of the world's supplies of rare earths, a group of 17 minerals used in electronics and defense and renewable energy industries.

Aside from reiterating China's stance, the report cited experts who highlighted United Nations declarations on sovereignty over resources and WTO rules that would allow China to make exceptions with its rare earth quotas under trade law.

"Western countries cite WTO clauses to criticize China ... but there are always exceptions to the WTO legal provisions," the paper quoted prominent Tsinghua University scholar Zhou Shijian as saying.

"For example, article 20 of the General Agreement on Tariffs and Trade expressly stipulates that contracted parties may, for certain special purposes, limit imports and exports," the paper said.

The WTO did not permit those general exceptions on the raw materials decision.

(Reporting by Michael Martina; Editing by Sugita Katyal)

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