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United States Seeks to Eliminate China’s Unfair Export Restraints on Rare Earths

06/27/2012

06/27/2012

Washington, D.C. – United States Trade Representative Ron Kirk announced today that the U. S. has requested the establishment of a World Trade Organization (WTO) dispute settlement panel to decide U.S. claims regarding China’s unfair export restraints on rare earths, tungsten and molybdenum. The European Union and Japan have also requested the establishment of panels on this matter today.

“These materials are key inputs in a multitude of U.S. manufacturing sectors and American-made products, including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum and chemicals,” said Ambassador Kirk. “It is vital that U.S. workers and manufacturers obtain the fair and equal access to raw materials like rare earths that China specifically agreed to when it joined the WTO.”

Earlier this year, the United States won a landmark WTO challenge against China’s export restraints on nine other industrial inputs. Although China argued in that case that its export restraints could be justified as conservation or environmental protection measures, the WTO concluded otherwise. Once again, despite China’s characterizations, its export restraint measures on rare earths, tungsten and molybdenum appear to be part of a troubling industrial policy aimed at providing substantial competitive advantages for Chinese manufacturers at the expense of foreign manufacturers. Specifically, because of China’s position as a leading global producer of these materials, its export restraint measures give China the ability significantly to affect global supply and pricing. These measures can provide important advantages to China’s downstream producers, to the detriment of their U.S. and other foreign counterparts. These measures also can create substantial pressure on foreign producers to move their operations, jobs and technologies to China.

The United States, the European Union and Japan requested formal consultations with China on March 13, 2012. The parties held consultations on April 25-26, 2012, without resolution of the matter.

Background

China unfairly imposes export restraints – including export duties and quotas – on rare earths, tungsten and molybdenum, as well as many intermediate products processed from these raw materials. In all, China’s export restraints on the materials at issue in this dispute cover approximately 100 tariff codes.

With respect to the harmful export duties that China imposes on rare earths, tungsten and molybdenum, China committed as part of the terms of its WTO accession to eliminate export duties for all products other than those listed in a specific annex. The export duties the United States is challenging are imposed on products not listed in that annex. The WTO recently confirmed in the China – Measures Related to the Exportation of Various Raw Materials dispute that China cannot justify its imposition of such export duties under the exceptions provided in Article XX of the General Agreement on Tariffs and Trade 1994 (GATT 1994).

The separate trade-distorting export quotas that China imposes on rare earths, tungsten and molybdenum, as well as the other export restrictions imposed through related export requirements, appear to be inconsistent with Article XI:1 of the GATT 1994, which generally prohibits these types of restrictions on exports. In addition, rules and requirements that China imposes in the administration of these export quotas also appear to run afoul of commitments set forth in China's WTO Accession Protocol not to restrict the right to export goods.