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United States Challenges China’s Export Duties on Nine Key Raw Materials to Level Playing Field for American Manufacturers

Washington, D.C. − U.S. Trade Representative Michael Froman announced today that the United States has launched a new trade enforcement action against the People’s Republic of China at the World Trade Organization (WTO) concerning China’s export duties on nine different raw materials.  When China joined the WTO, China agreed to eliminate its export duties on these products, but it has failed to follow through on this commitment.  Today’s action is the 13th trade enforcement case the Obama Administration has launched against China at the WTO – more than any other WTO country over the same period.  The U.S. has won every case that has been decided so far.

The export duties China imposes provide substantial competitive advantages for Chinese manufacturers by making them more expensive for U.S. manufacturers that rely on these raw materials to produce their downstream goods.  These nine raw materials – antimony, cobalt, copper, graphite, lead, magnesia, talc, tantalum, and tin – are key inputs into high-value Made-in-America products in vital industrial sectors, including aerospace, automotive, electronics, and chemicals.  China’s export duties provide an unfair competitive advantage to China at the expense of American workers and manufacturers.

Later today, at the Port of San Diego, Vice President Biden will deliver remarks highlighting today’s trade enforcement action and the Obama-Biden Administration’s aggressive record on trade enforcement.

“It all comes down to fair competition—a notion that is fundamental to who we are as Americans,” Vice President Biden will say in his remarks. “And one of the most important ways we have done that is by enforcing our trade laws—more aggressively than any previous Administration in history. Because here’s what I know—given a level playing field, American businesses and American workers will out-compete anyone. Period.”

 “These duties are China’s attempt to game the system so that raw materials are cheaper for their manufacturers and more expensive for ours,” said Ambassador Froman. “This scheme is directly at odds with WTO commitments China has made, and as we’ve shown time and again, we will hold them accountable to their commitments. This case is part of the Administration’s continuing work to level playing field for American workers and manufacturers in order to grow our economy and support quality jobs here at home.”

“It is the responsibility of the United States to lead the way in fighting for fair trade standards. Today’s action against China is a step in the right direction towards creating a more level playing field for American workers, farmers, and businesses,” said Congressman Ron Kind (WI-03).

“I applaud today’s trade enforcement action – which is exactly the type of action I had in mind when I helped push for the Trade Enforcement Trust Fund last year. If countries are going to trade with the United States they need to do so under good faith and in accordance with international standards,” said Congressman Rick Larsen (WA-02)

China’s export duties on these raw materials, which range from 5 to 20 percent ad valorem, disadvantage U.S. producers by raising the prices of these raw materials for downstream manufacturers outside of China, while lowering the prices paid by China’s manufacturers that use these same raw materials.  These Chinese manufacturers are able to manufacture lower-priced goods using these unfairly priced raw materials, creating an uneven playing field for U.S. competitors.  In this way, China’s export duties create pressures on U.S. and other non-Chinese producers to shift production operations, technologies, and jobs to China. 

Today’s action continues the Administration’s strong record of enforcing U.S. rights under our trade agreements.  Since 2009, the Administration has brought 22 enforcement actions (including this one) at the WTO, and won every single one decided thus far.  Since 2015, USTR has announced the following enforcement victories:

  • In April 2016, China signed a Memorandum of Understanding with the United States in which China agreed to take specific actions that would remove all the WTO-inconsistent elements of its “Demonstration Bases-Common Service Platform” export subsidy program.  The United States initiated a WTO challenge against the program because China was providing prohibited export subsidies through “Common Service Platforms” to manufacturers and producers across seven economic sectors and dozens of sub-sectors located in more than one hundred and fifty industrial clusters throughout China known as “Demonstration Bases,” thereby creating unfair competition for American workers and businesses. 
     
  • In February 2016, a WTO panel found in favor of the United States in a dispute challenging India’s “localization” rules discriminating against imported solar cells and modules under India’s National Solar Mission.  The WTO panel agreed with the United States that India’s domestic content requirements discriminate against U.S. solar cells and modules by requiring solar power developers to use Indian-manufactured cells and modules, in breach of international trade rules.  (India’s appeal of the panel report is pending.)
     
  • In July 2015, the United States prevailed in a WTO challenge to China’s compliance actions following WTO findings in 2012 that China’s duties on high-tech steel were inconsistent with WTO rules.  Those WTO-inconsistent duties contributed to over $250 million in annual export losses for American steel exporters.  The U.S. compliance challenge was the first time any WTO Member had initiated a WTO proceeding to challenge a claim by China that it had complied with adverse WTO findings.
     
  • In June 2015, the WTO found in favor of the United States in a dispute challenging India’s ban on various U.S. agricultural products – such as poultry meat, eggs, and live pigs – allegedly to protect against avian influenza.  The WTO agreed with the United States that India’s ban breached numerous international trade rules, including because it was imposed without sufficient scientific evidence and was not based on international standards, which confirm that importing U.S. products is safe.
     
  • In January 2015, the WTO found that Argentina’s import licensing requirements and other import restrictions breach international trade rules.  These restrictions potentially affect billions of dollars in U.S. exports each year, including exports of energy products, electronics and machinery, aerospace equipment, pharmaceuticals, precision instruments, medical devices, motor vehicle parts, and agricultural products.

BACKGROUND

The United States is challenging the export duties on 21 tariff lines relating to 9 raw materials: antimony, cobalt, copper, graphite, lead, magnesia, talc, tantalum, and tin.  These duties range from 5 to 20 percent ad valorem.  Downstream products potentially affected by this challenge include:

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. 

In two previous WTO disputes (China – Measures Related to the Exportation of Various Raw Materials and China – Measures Relating to the Exportation of Rare Earths, Tungsten, and Molybdenum), the WTO confirmed that China is obligated to eliminate export duties on any products other than those listed in the annex.  The WTO also found that China cannot seek to justify imposing such export duties through the exceptions listed in Article XX of the GATT 1994.  Through this new WTO action, the United States seeks to extend and reinforce the important victories obtained by the United States in those two previous WTO challenges.  

Consultations are the first step in the WTO dispute settlement process.  If the United States and China are not able to reach a mutually agreed solution through consultations, the United States may request that the WTO establish a dispute settlement panel to examine the matter.

See a copy of the consultation request letter here.