USTR Announces WTO Challenge of China Rare Earths Export Restraints
U.S. Trade Representative Ron Kirk announced that the United States has requested consultations with China at the World Trade Organization (WTO) concerning China’s export restraints on rare earths, as well as tungsten and molybdenum. USTR states that these materials are key inputs in a multitude of U.S. products and manufacturing sectors, including hybrid car batteries, wind turbines, energy efficient lighting, steel, advanced electronics, automobiles, petroleum, and chemicals.
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(Consultations are the first step in the WTO dispute settlement process, and parties are encouraged to agree to a solution at this stage. Under WTO rules, if the matter is not resolved through consultations within 60 days, the United States may request the establishment of a WTO dispute settlement (DSB) panel. The European Union and Japan also requested consultations with China on this matter.)
China’s Export Restraints Artificially Increase Input Prices
According to USTR, China imposes several different types of export restraints on rare earths, tungsten, and molybdenum, including export duties, export quotas, and export pricing requirements, as well as related export procedures and requirements. USTR states that, because China is a top global producer for these key inputs, its harmful policies artificially increase prices for the inputs outside of China, while lowering prices in China.
USTR asserts that this price dynamic creates significant advantages for China’s producers when competing against U.S. producers -- both in China’s market and in other markets around the world. Furthermore, improper export restraints also contribute to creating substantial pressure on U.S. and other non-Chinese downstream producers to move their operations, jobs, and technologies to China.
Consultations Request Latest in Series of Enforcement Steps Against China
USTR states that this action is the latest in a series of enforcement steps the United States has taken to hold China accountable under its WTO commitments. Those steps include several recent actions at the WTO, including cases challenging China’s discriminatory electronic payment services policies, wind power equipment subsidies, and treatment of imported U.S. high-tech steel and chicken products. The U.S. has also taken action to counter injurious and rapidly increasing Chinese tire imports.
According to USTR, the United States recently won a WTO challenge against China’s export restraints on nine other raw materials. USTR states that China’s export restraint measures on rare earths, tungsten, and molybdenum appear to be part of the same troubling industrial policy aimed at providing substantial competitive advantages for Chinese manufacturers.
(See ITT’s Online Archives 12013112 for summary of WTO Appellate Body ruling in China export restraints on raw materials, which the USTR argues confirmed that China cannot justify its imposition of export duties using GATT Article XX. See also ITT’s Online Archives 11070615 for summary of the panel report in the same dispute, which USTR Kirk announced as a victory for the U.S.
See ITT’s Online Archives 11060723 for summary of another USTR-announced victory in the China wind power equipment WTO dispute. See ITT’s Online Archives 11021427 for summary of U.S. request for the formation of a WTO panel in the China high-tech steel and electronic payment services disputes. See ITT’s Online Archives 11092111 for summary of U.S. request for consultations in the China broiler chickens dispute, and 12012513 for summary of formation of a panel in the same dispute.)
USTR fact sheet detailing uses of rare earths as an input available here.
Senate Finance Committee Chairman Baucus' press release (dated 03/13/12) on the request for consultations available here.
House Ways and Means Committee press release, including statements by Chairman Dave Camp and Trade Subcommittee Chairman Kevin Brady available here.
USTR complilation of congressional, union and other statements of support (03/14/12) available here.
Japan Ministry of Economy, Trade and Industry (METI) release on their similar filing (dated 03/12/12) available here.