US-Vietnam naval drill begins against China's wish (AFP)

DANANG, Vietnam (AFP) – Former enemies Vietnam and the United States began a joint naval drill on Friday, despite Chinese objections after weeks of escalating tension in the disputed South China Sea.

US officials described the week-long exercises off Vietnam's central coast as "non-combatant events", focused on areas such as navigation and maintenance, in a statement from the consulate general in Ho Chi Minh City.

But China's top military officer General Chen Bingde said Monday that the timing of US naval exercises in the area was "inappropriate", after talks with his American counterpart Admiral Mike Mullen aimed at cooling the tensions.

China, the Philippines, Vietnam, Brunei, Malaysia and Taiwan all have overlapping claims to parts of the South China Sea, believed to be rich in oil and gas deposits and home to shipping lanes vital to global trade.

Vietnam and the Philippines have in recent months accused Beijing of taking increasingly aggressive actions in staking its claims in the sea.

Tensions flared in May when Vietnam said Chinese marine surveillance vessels cut the exploration cables of an oil survey ship.

Since then, a series of anti-China protests have been held in Vietnam, where rallies are rare, with the latest on Sunday being forcibly dispersed by local police. At least 10 people, including journalists, were briefly arrested.

During talks on June 25, Beijing and Hanoi promised to resolve the issue peacefully, and China has warned Washington not to get involved in regional maritime disputes, according to state media.

The US and Vietnam, former wartime enemies, normalised relations in 1995 and have been rapidly building relations across a wide range of areas, including military affairs.

"This exchange helps our respective sailors gain a greater understanding of one another and builds important relationships between our navies for the future," Rear Admiral Tom Carney said of the latest drill.

The Philippine and US navies also recently held 11 days of military exercises close to the South China Sea, war games that have been seen as aimed at recent Chinese provocations.

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WTO rules against China on raw materials (AP)

GENEVA – The World Trade Organization ruled Tuesday that China was unfairly protecting its domestic manufacturers by limiting the export of nine raw materials that are used widely in steel, aluminum and chemical industries.

A WTO panel sided with the United States, European Union and Mexico, which had each filed complaints saying China was driving up the prices they pay for raw materials such as coke, bauxite and zinc by setting export duties and quotas on them.

The panel rebuffed China's argument that its export limits were needed to protect its environment, and said those export restrictions should be removed.

WTO judges concluded that "China's export duties were inconsistent with the commitments that China had agreed to" when it joined the trade organization in 2001. "The panel also found that export quotas imposed by China on some of the raw materials were inconsistent with WTO rules."

China's export restrictions have caused supplies of some raw materials to tighten globally, pushing prices higher and favoring an emphasis on using Chinese manufacturing facilities.

But the ruling could be more important in helping the U.S. and Europeans support another trade complaint against Chinese attempts to restrict exports of rare-earth materials that are used in many high-tech products, according to Europe's trade chief.

"This is a clear verdict for open trade and fair access to raw materials," said EU Trade Commissioner Karel De Gucht. "It sends a strong signal to refrain from imposing unfair restrictions to trade and takes us one step closer to a level playing field for raw materials."

She said expectations now are for China to "bring its export regime in line with international rules. Furthermore, in the light of this result, China should ensure free and fair access to rare earth supplies."

EU officials say export prices for raw materials more than doubled when compared with the price in China because of the export quotas, and for some products half of the final cost to consumers depends of the cost of those raw materials.

Other materials affected by Tuesday's ruling include fluorspar, magnesium, manganese, silicon carbide, silicon metal and yellow phosphorus.

China can still appeal the panel's decision.

U.S. Trade Representative Ron Kirk called the ruling a big victory for workers and manufacturers in the U.S. and worldwide.

"China's policies provide substantial competitive advantages for downstream Chinese industries at the expense of non-Chinese users of these materials," he said.

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