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U.S. and Others Balk as China Furthers Monopoly on Materials Necessary to Power Your Smartphone

BEIJING (The Blaze/AP) -- China defended curbs on production of rare earths used in mobile phones and other high-tech products as an environmental measure Tuesday, responding to reports the United States, Europe and Japan plan to file a trade complaint with the WTO.

Global manufacturers that depend on Chinese supplies were alarmed by Beijing's 2009 decision to limit exports while it builds up an industry to produce lightweight magnets and other goods that use them. China has about 30 percent of rare earths deposits but accounts for 97 percent of production.

Beijing needs to limit environmental damage and conserve scarce resources, said a foreign ministry spokesman, Liu Weimin.

"We think the policy is in line with WTO rules," Liu said at a regular briefing.

The United States, the European Union and Japan plan to file a World Trade Organization case challenging the restrictions, according to U.S. officials. President Barack Obama spoke on Tuesday about this case.

Here MSNBC discusses how the issue with Chinese exports will remain a "political football" during the election year:

Visit msnbc.com for breaking news, world news, and news about the economy

China would have 10 days to respond to a WTO complaint and would have to hold talks with the United States, EU and Japan within 60 days. If an agreement cannot be reached within that time, Washington and its partners could request a formal WTO panel to investigate Chinese practices.

Beijing has announced quotas limiting rare earths exports and said only a handful of companies will be licensed to sell them. Demand has been so weak amid global economic malaise that government figures show exports for the first 11 months of 2011 were equal to 49 percent of the quota.

"Exports have been stable. China will continue to export, and will manage rare earths based on WTO rules," Liu said. "China hopes other countries can shoulder responsibility for supplies and can find alternative resources."

Rare earths are 17 elements including cerium, dysprosium and lanthanum that are used in manufacturing flat-screen TVs, batteries for electric cars and wind turbines. They also are used in some high-tech weapons. Business Insider explains these materials are coveted for their "magnetic, heat-resistance and phosphorescence properties." Further it says that while these materials are a small component in a finished product, they are often "non-substitutable".

The United States, Canada, Australia and other countries have rare earths but stopped mining them in the 1990s as lower-cost Chinese ores flooded the market.

Companies are developing new mines in Canada, California, India, Malaysia, Russia and other countries. Some are due to start producing by 2015.

China's export quota for the first half of 2012 was cut by 27 percent from the same period last year to 10,546 tons, according to the Commerce Ministry. It said in December the number of exporters would be reduced from 26 to 11.

CNN has more on China's position on its rare earth exports and why it has such a strong hold on the market for these elements:

The Detroit Free Press reports U.S. Trade Representative Ron Kirk as saying that U.S. manufacturers and individuals would be hurt from this restraint and that "massive distortions and harmful disruptions in supply" would result.

Bloomberg reports that China's official news agency, Xinhua News Agency, ran an opinion saying the U.S. could be hurting trade ties with this "rash and unfair" move.

In a separate case in July, a WTO panel ruled Beijing was improperly protecting its companies by limiting exports of nine materials used in the steel, aluminum and chemical industries. The case did not mention rare earths but U.S. and European officials expressed hope the ruling would lead Beijing to repeal its export controls.

The Chinese government has said it is appealing that ruling.

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