U.S. launches new WTO case against China

By Don Lee

March 13, 2012 12 AM PT

Reporting from Washington — Stepping up the pressure against China over trade in an election year, the Obama administration Tuesday launched a case with the World Trade Organization aimed at forcing the Chinese to halt their export restrictions of rare earths -- minerals that are vital to such products as hybrid vehicles and cellphones.

The move by the United States was joined by the European Union and Japan, and came despite Chinese state media warnings that it would trigger a backlash and antagonize trade relations between the world’s two largest economies.

U.S. Trade Representative Ron Kirk, in announcing that the U.S. had requested the WTO to open talks with China over the issue, said that China’s export restraints were hurting American workers and manufacturers. Its policies are “resulting in massive distortions and harmful disruptions in supply chains for these materials throughout the global marketplace,” he said in a statement.

China dominates the globe’s mining and processing of rare earth metals. U.S. officials allege that Chinese export duties, quotas and other practices to control the production and supply of these minerals have artificially increased prices outside of China and have created pressure on U.S. and other foreign companies to move operations, jobs and technologies to China.

The official New China News Agency defended China’s export quotas for rare earths , saying in a commentary that they were aimed at protecting the country’s resources and environment and that they were in accordance with WTO rules.

“It is rash and unfair for the United States to put forward a lawsuit against China before the WTO,” the commentary said. “In [the] face of such unreasonable and unfair charges, China will make no hesitation in defending its legitimate rights in trade disputes.”

China’s Foreign Ministry spokesman Liu Weimin said at a regular press briefing Tuesday, hours before the U.S. announcement, that China would continue to export and manage rare earths based on WTO rules. “China hopes other countries can shoulder responsibility for supplies and can find alternative resources,” he said, according to the Associated Press.

The U.S. Trade representative’s request for consultations is the first step in proceedings that could lead to a full legal case and the establishment of a WTO dispute settlement panel, if the matter isn’t resolved through talks within 60 days.

China has a strong record of responding positively to WTO cases in which it is ordered to correct violations, and analysts in the U.S. have questioned why the Obama administration had not taken the matter of rare earths to the global trade body earlier.

More recently, Obama has taken a stronger stance on China’s economic practices. In January, he announced the establishment of an interagency trade enforcement unit aimed at cracking down against unfair commercial practices that hurt American interests, singling out China as a potential target.

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China warns of backlash if U.S. presses rare-earths case with WTO