U.S. files trade complaint against China over duties on key raw materials

By Jim Puzzanghera

July 13, 2016 3:36 PM PT

Tensions are rising between the U.S. and China and not just on the presidential campaign trail.

A day after an international tribunal ruled against China’s claim to “historic rights” for a vast part of the South China Sea, the Obama administration said on Wednesday it filed a formal trade complaint against the Asian superpower challenging export duties on nine key raw materials.

In an enforcement action launched with the World Trade Organization, the U.S. said China failed to abide by a commitment to eliminate duties of 5% to 20% charged on exports of materials, including cobalt, copper, graphite, lead and tin.

The materials are vital to manufacturing in important U.S. industrial sectors, such as aerospace, automotive, electronics and chemicals, administration officials said.

The export duties mean American companies, including those that use graphite to produce lithium-ion batteries or cobalt to make gas turbine engines, pay more for the raw materials than competitors in China.

During a speech at the Port of San Diego Wednesday, Vice President Joe Biden blasted China’s trade practices as unfair.

“We’re going to continue to be as aggressive as we can when any country violates agreements they made, hurting American businesses, American entrepreneurs, American workers,” he said.

The complaint was the 13th filed against China at the WTO by the Obama administration since 2009. The filing is drawing heightened attention because Donald Trump, the presumptive Republican presidential nominee, has sharply criticized the administration’s trade relations with China.

In a speech in Pennsylvania last month, Trump said the Obama administration had failed to go after China for trade violations. Trump vowed a tougher approach if elected president.

China’s entry in 2001 into the WTO “has enabled the greatest jobs theft in history,” Trump said, vowing to enact tariffs if the country “doesn’t stop its illegal activities.”

The U.S. supported China’s entrance into the global trading community during the administration of Bill Clinton, the husband of presumptive Democratic presidential nominee Hillary Clinton.

A Trump campaign spokeswoman did not respond to a request for comment.

Hillary Clinton has been critical of some Obama trade policies, including the Trans-Pacific Partnership pact. The free-trade agreement involving the U.S. and 11 Pacific Rim nations — though not China — is awaiting approval by Congress.

Peter Morici, a University of Maryland professor and former official at the U.S. International Trade Commission, said the Obama administration is trying to get tougher on trade enforcement against China as Trump has pounded on the issue during his campaign.

“I think the cases are justified,” Morici said of the administration’s WTO filings. “Trump talks about bringing more of them. I kind of have more confidence that Trump would bring them than Clinton would.”

Zhu Haiquan, a spokesman for the Chinese embassy in Washington, said the U.S. was abusing the WTO process.

“China urges the United States to strictly abide by the WTO rules and restrain from abusing of trade remedy measures,” he said.

Derek Scissors, a China expert at the conservative American Enterprise Institute think tank, said China’s export duties on raw materials were an indirect subsidy to its companies.

“It may be portrayed as important politically — getting tough on China — but is far too subtle for that,” he said.

Still, Scissors said, “it could turn out to be a very small step toward a much-needed revamp in U.S. trade strategy toward China, to be undertaken by the next administration.”

Last year, China eliminated export controls on rare-earth metals, such as tungsten, after losing an appeal of a WTO ruling against it triggered by a complaint filed by the U.S., Japan and the European Union.

Biden said the Obama administration has been consistent in demanding China and other nations live up to the terms of their trade agreements.

“Since day one, our administration has enforced our trade laws aggressively, more aggressively than any administration in the past,” he said, noting the U.S. has won all the WTO cases brought against China that have been decided so far. “I’m confident we’ll win this one.”

Staff writer Don Lee contributed to this report.

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UPDATES:

10:58 a.m.: This article was updated with comment from a spokesman for the Chinese Embassy in Washington.

3:36 p.m.: This article was updated with additional information and comment.

The original article was published at 10:51 a.m.