White House Wants Consultations with China on Metal Exports



March 14, 2012
Detroit Free Press

WASHINGTON – The White House is taking issue with what it calls China’s unfair export restraints on certain rare earth metals needed to make hybrid car batteries, wind turbines, energy efficient lighting and more.

In a statement Tuesday morning at the White House, President Barack Obama outlined his administration’s decision to request consultations with China through the World Trade Organization, a first step toward asking for dispute resolution.

“We prefer dialogue,” Obama said. “That’s especially true when it comes to key trading partners like China … but when it is necessary I will take action if our workers and our businesses are being subjected to unfair practices.” Obama noted victories on trade disputes regarding Chinese tire imports and, earlier this year, a WTO finding that China’s export restraints on other industrial raw materials used as components in the steel, aluminum and chemicals industries were inconsistent with trade body’s practices.

“If China would simply let the market work on its own we’d have no objection,” said Obama.

U.S. Trade Representative Ron Kirk said the request for consultations at the WTO will trigger the establishment of a settlement panel if, after 60 days, the issue is unresolved. The European Union and Japan also requested WTO consultations with China on rare earth metals as well as tungsten and molybdenum, the materials under dispute. “America’s workers and manufacturers are being hurt in both established and budding industrial sectors by these policies,” Kirk said. “China continues to make its export restraints more restrictive, resulting in massive distortions and harmful disruptions in supply chains.”

The latest action comes as the Obama administration takes an ever-harder line regarding trade enforcement. Last month, Obama created the Interagency Trade Enforcement Center to monitor and enforce what the White House called “unfair subsidies that tilt the global market against U.S. firms.” In December, Chinese officials announced it would levy new tariffs on certain new sedans and sport-utility vehicles imported into that country from the U.S., further increasing tensions between the two trading partners.

On Tuesday. the Office of the U.S. Trade Representative said 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.”  The USTR said China uses export duties, quotas, pricing requirements and other means to provide advantage to its own companies, hurting U.S. producers. As part of its joining the WTO, China committed to eliminate export duties on all but a specific list of products – and the U.S. is challenging duties placed on products not on the list.

“Tungsten and molybdenum are important raw materials in making steel and other products, and China's export restrictions have distorted the world market for those materials, to the detriment of American manufacturers and American workers,” said Thomas Gibson, president and CEO of the American Iron and Steel Institute, an industry group based in Washington, D.C. “

And it’s not just rare earth metals that are in question: A group of senators and congressmen are circulating a letter on Capitol Hill to be delivered to the president this week raising questions about the auto parts sector and accusing the Chinese of limiting imports into their market, subsidizing their own exports and restraining access to raw materials.
U.S. Sen. Debbie Stabenow of Michigan was among those who first brought up the issue of Chinese trade practices as it relates to raw materials a year ago.

“I have been calling for strong action to address China’s illegal actions and am glad that action is now being taken,” she said. “Michigan's economic turnaround depends on innovative businesses being able to manufacture the products of the future. We cannot let China's unfair trade practices stop job growth.” The U.S.-China Business Council, a group of 240 American companies that do business with China, issued a statement saying the U.S. “has every right to utilize the WTO dispute settlement system” when it feels that good-faith discussions haven’t worked.

“Today’s call for formal consultations with China is simply the first step in the process and gives all parties involved 60 days to come to an agreement that advances free trade and international best business standards,” the statement said. But Gregory Husisian, a lawyer at Foley & Lardner in Washington, D.C., specializing in export controls and sanctions, said it’s unlikely the latest trade dispute will get settled this year. “Sometimes the parties can reach a quick settlement but that doesn’t seem to happen with China,” he said. “Often you see retaliation from the Chinese government.”

Husisian said the case seemed to center on the need of wind power manufacturers which need rare earth metals for the magnets that operate wind turbines. “The merits of the case are fairly good,” he said. “Unless you’ve negotiated some type of exception those practices are generally prohibited. The problem is it can take years to go through consultation then arguments. Then it has to go to the WTO’s appellate body. … You’ve got a good case but it takes years to get to the end of the process.”