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U.S. wins trade dispute with China over rare earth materials

WASHINGTON — The World Trade Organization said Wednesday that China’s restrictions on rare earth and other materials including tungsten and molybdenum that are used in hybrid and electric car batteries and other industries violate trade rules.

The U.S. Trade Representative’s Office in March 2012, joined by the European Union and Japan, challenged China’s export limits on rare earth metals and other minerals essential for use in automobiles — along with wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum and chemicals.

The U.S. praised the WTO panel’s 257-page decision. China has the right to appeal the decision within 60 days.

“Time and again, the Obama Administration has made clear that we are willing to go to the mat for American workers and businesses to make sure that the playing field is fair and level,” said U.S. Trade Ambassador Michael Froman. “China’s decision to promote its own industry and discriminate against U.S. companies has caused U.S. manufacturers to pay as much as three times more than what their Chinese competitors pay for the exact same rare earths. WTO rules prohibit this kind of discriminatory export restraint and this win today, along with our win 2 years ago in an earlier case, demonstrates that clearly.”

China, in early 2012, drastically reduced its export quotas for rare earths, prompting spike in world prices and disruption to the global rare earths market. The U.S. previously won a separate fight in 2011 challenging China’s use of export restraints on raw material inputs used in steel, aluminum, and chemicals industries.

The WTO panel found that China had violated international trade rules and “China failed to justify those measures as legitimate conservation or environmental protection measures,” the U.S. trade representative’s office said.

China’s actions “unfairly deny and limit access to key raw materials” to promote China’s industry at the expense of other countries, Froman said.

The White House said in 2012 China’s “improper” export controls “contribute to creating substantial pressure on U.S. and other non-Chinese downstream producers to move their operations, jobs, and technologies to China.” China imposed tariffs on 17 rare earth materials that dramatically hiked the prices of some products made in the U.S. using the materials.

Froman said the U.S. will not allow that type of pressure “to go unchallenged.”

In early 2012, Obama said he was creating an Interagency Trade Enforcement Center to crack down on unfair trade practices — especially from China.

The White House said China’s 2012 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.”

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