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U.S. challenges China in WTO over rare earth restrictions

Bulldozer scoop soil containing various rare earth to be loaded on to a ship at a port in Lianyungang, east China's Jiangsu province on September 5, 2010, for export to Japan.

David Brancaccio: What's your most precious electronic gadget? It wouldn't exist without the rare earth metals inside, and China has a big slice of the world's supply. Now, the Obama administration is taking China to the World Trade Organization saying it's not playing fair with those crucial raw materials.

Joining us is the BBC correspondent in Shanghai, John Sudworth. Hello.

John Sudworth: Hi, David.

Brancaccio: Why are U.S. officials with European Union support so concerned about restrictions on rare earth mineral exports from China?

Sudworth: Well, the allegation is that because China is restricting the export of those materials, it's driving up global prices, which is hitting economies not just in North America, but in Europe and elsewhere too.

Brancaccio: Now, will bringing this case to the WTO change the dispute?

Sudworth: It's difficult to know whether this case at the WTO will make a huge difference. China already is saying that it is justified in place because they are there for environmental protection, and to protect its own economy. And to some extent, you can sympathize with that argument.

China holds only one-third of the world's reserves of rare earths, and yet it's responsible for 90 percent of the production. And that's widely believed to be because it's only in China that you can do the kind of mining with all of the consequent environmental damage that comes from the kind of mining we're talking about. Elsewhere in the world, it wouldn't be possible. And China says because of that reason, it needs to put the restrictions in place.

Of course, a counter-allegation is that they're there simply as an element of protectionism -- and that's why they're being challenged.

Brancaccio: The BBC's John Sudworth in Shanghai. Thank you.

Sudworth: Thanks very much, David.

About the author

David Brancaccio is the host of Marketplace Morning Report. Follow David on Twitter @DavidBrancaccio

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