The outcome of this case obliges China to bring the challenged measures into compliance with the rulings, the European Commission said in a statement from Brussels. “However, the EU continues to be deeply troubled by China's use of export restrictions not only on the specific products at issue in this dispute, but also on rare earth and many other industrial raw materials.”

Appellate Body judges urged China to modify its policies on raw-material exports to ensure they “do not operate to bring about a WTO-inconsistent result.”

“China respects the rulings of the WTO and will apply reasonable policies to administer resource products in accordance with the WTO rules, so as to realize sustainable development,” the Chinese mission in Geneva said in an e-mailed statement.

China, the world's second-largest economy, is the top producer of cadmium, gold, indium, iron ore, lime, lead, manganese, mercury, molybdenum, phosphate, salt, tin, tungsten, vanadium and zinc. Its export restraints have caused worldwide supplies of many raw materials to plummet, sending prices higher and providing an incentive for manufacturers to move to China to take advantage of the cheaper materials.

Economic Importance

The commodities at issue in the WTO complaint, filed by the U.S., the EU and Mexico, also include magnesium, manganese, silicon carbide, fluorspar, silicon metal and yellow phosphorus, which are used by the steel, aluminum, automotive and chemicals industries.

The EU said imports of the raw materials covered by the case reach 1 billion euros ($1.3 billion) a year and that “the economic importance is well beyond this figure as those represent inputs for the production of a large range of products.”

China argued that the restrictions are necessary to conserve exhaustible natural resources and ease overproduction and emissions of carbon and sulfur gases from furnaces. The U.S., the EU and Mexico said the curbs discourage the export of materials that are “critical” for their manufacturers, while keeping them cheaper and readily available in China.

Rare earths became a political and legislative issue after China moved to limit domestic output and slash export quotas in July 2010 by 40 percent, souring ties with major users including the U.S. and Japan, where buyers have cut usage after prices soared in the first half of 2011. The Chinese government, which supplies 95 percent of global rare earths, said on Dec. 28 it was leaving the 2012 overseas sales caps virtually unchanged.

The U.S. Energy Department said earlier this month that limited supplies of five rare-earth minerals — dysprosium, terbium, europium, neodymium and yttrium — pose a threat to increasing use of clean-energy technologies such as wind turbines and solar panels. While prices of rare earths fell in the second half of 2011, they remain volatile, leading some companies to search for ways to consider reducing reliance on the minerals, the Energy Department said.

China has said the curbs protect the environment and are in line with its WTO commitments. The country's Inner Mongolia Baotou region produces so-called light rare earths such as lanthanum, cerium and samarium. Heavy rare-earth production, concentrated in the south of China, includes the elements dysprosium, gadolinium and terbium.

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