On Wednesday, the World Trade Organization (WTO) ruled that China has broken international trade law in its efforts to restrict the export of rare earth minerals, as well as tungsten and molybdenum, to the world. If China does not reform its policies regarding rare earth metals, it could be subject to trade sanctions from the US, the EU, and Japan.

Rare earth metals like praseodymium, cerium, and neodymium are vital to digital technology—they are essential to the workings of fiber optic cables and wind turbines, to say nothing of the chip in your smartphone, which can contain up to 60 different elements. And rare earths are almost exclusively mined in China, which has made for some interesting economic politics in the last decade.

China's predominance in the market led the US to file a case against the country at the WTO in 2012 after China cut its export quota by 40 percent in 2010. The supply shortage sent rare earth metal prices skyrocketing, according to The New York Times.

The US, which was later joined by the EU and Japan in making its case to a WTO panel in Geneva, argued that China was unfairly restricting exports and allowing its domestic industries to take advantage of a more forgiving rare earth metals market. China, which joined the WTO in 2001 and agreed to abide by the organization's rules of trade, responded, saying that it was restricting supply because of environmental concerns and that it had a right to conserve its exhaustible natural resources.

Mining rare earth metals is toxic work, and the industry is responsible for a host of problems for miners, who often end up inhaling radioactive dust, and for the environment, which can become a wasteland in the wake of rare earths mining. The New York Times notes that Chinese authorities have been active of late in shutting down the most dangerous mining operations, some of which are run illegally. As Ars wrote yesterday, the external costs to mining these metals is great enough that researchers are starting to look at ways to make recycling them feasible.

Still, the WTO panel wrote in a summary of its decision that “[i]t found that China's export quotas were designed to achieve industrial policy goals rather than conservation... the Panel found that the challenged export quotas do not work together with measures restricting domestic Chinese use of rare earths, tungsten, and molybdenum.”

“The Panel concluded that the overall effect of the foreign and domestic restrictions is to encourage domestic extraction and secure preferential use of those materials by Chinese manufacturers,” The WTO wrote on Wednesday.

In recent years, companies have looked outside of China to mine rare earth metals with varying success. One company, Molycorp, even has a mine in California, and according to a March 2014 financial outlook, it has been narrowing its losses in a creep toward profitability.

Karl A. Gschneidner, a professor of materials science at Iowa State University and an expert on rare earths, told Ars today that he's optimistic about the WTO's decision. “I think it's a good idea. It's a good thing,” he said. When asked about whether a reverse in Chinese policies would adversely affect American mines like Molycorp, he responded, “It certainly will have an impact on somebody, but that's competition.”

Update: Molycorp responded to Ars in an e-mail on Wednesday with its reaction to the WTO's ruling. In a statement, Molycorp vice president of corporate communications Jim Sims wrote: