Obama Announces WTO Case Against China

As China tries to get a firm grasp on its control of rare earth metals, the EU, Japan, and the US have rallied together to file a case against China at the WTO. China produces a majority of the 17 rare earth metals that are essentials in making a variety of products, such as mobile phones and electric car batteries. Reuters reports:

The rare earths dispute is one of several between Beijing and the other three economic powers, as Chinese industry remolds the world economic order. The dispute is the first to be jointly filed by the European Union, the United States and Japan.

“China continues to make its export restraints more restrictive, resulting in massive distortions and harmful disruptions in supply chains for these materials throughout the global marketplace,” U.S. Trade Representative Ron Kirk said.

The action over China’s export curbs involving rare earths, as well as tungsten and molybdenum, begins a 60-day process for the two sides to try to resolve the dispute.

If unsuccessful, the next step would be for the United States, the European Union and Japan to ask the WTO to establish a dispute-settlement panel to decide the case, which with appeals could take as long as two years.

The suit seemed to follow President, Barack Obama’s, claim that he would take a harder stance on China, but Beijing has stated that it has followed the WTO rules. The Associated Press reports:

President Barack Obama warned China Tuesday that it would not be allowed to gain a competitive advantage in world trade by “skirting the rules.”

China has reduced its export quotas of these rare earth minerals over the past several years to cope with a growing demand during rapid business expansion at home, although Chinese officials also cite environmental concerns as the reason for the restrictions. U.S. industry officials suggest it is an unfair trade practice that violates rules established by the WTO, a group that includes China as a member.

Administration officials said Beijing’s export restrictions give Chinese companies a competitive advantage by providing them access to more of these rare materials at a cheaper price, while forcing U.S. companies to manage with a smaller, more costly supply.

On Tuesday, a Chinese foreign ministry spokesman defended Beijing’s curbs on rare earth production as necessary to limit environmental damage and conserve scarce resources.

Watch Obama’s press conference on the WTO complaint:

The dispute over rare earths is one of five other issues, including those involving auto parts, cars and solar panels, that American and/or European officials are pursuing as trade tensions with China continue to flare. The New York Times reports that American and European officials had held off over the past month, but now have begun to act on such tensions:

The United States, seeking a good start with Mr. Xi, who is expected to become China’s top leader next winter, postponed acting on the solar panel trade dispute until March to avoid colliding with the Chinese official’s visit to the White House in February.

But China is seldom popular during election years in the United States, and this year is no exception. Mitt Romney and Congressional Democrats and labor unions have little in common politically — except that they have all called for tough trade policies toward China. It would be politically difficult for the White House to ignore the outcry.

The European Union, for its part, has also been fairly quiet in the last month about Chinese trade policies, as it lobbied for a public commitment of Chinese money to ease the European debt crisis. But that sense of crisis has cooled somewhat, now that Greece has succeeded in reaching a debt reduction deal with its private creditors.

And senior European Union officials have concluded that even if Beijing does decide to lend money toward a European bailout after two years of resistance, it would not be enough to make a significant difference, according to a person with a detailed knowledge of European deliberations on the issue who was not authorized to comment publicly.

Read more about China’s control of rare earth metals , and the ongoing dispute over China’s solar industry, via CDT.