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December 22, 2010

US nearing decision on new WTO case versus China


December 22, 2010

WASHINGTON: The United States is nearing a decision on whether to take action at the World Trade Organsation against China’s rare earth minerals export restraints or other practices by Beijing to help its clean energy sector.
“We would be very surprised if they don’t file a formal request for consultations,” said Terry Stewart, an attorney for the United Steelworkers union, which filed a petition in September with the US Trade Representative’s office.
Rare earth minerals are used in the production of wind turbines, electric vehicles, solar cells and energy efficient lighting.
China controls about 97 percent of the world trade in rare earth minerals and has alarmed its trading partners by using taxes and quotas to restrict export supplies.
USTR said on Oct 15 it had accepted the petition and would decide by the middle of January whether to ask China for dispute settlement talks at the World Trade Organsation.
With Chinese President Hu Jintao due to be in the United States the week of Jan. 16, “I think that they might move (their decision) up,” said Alan Wolff, a trade lawyer with Dewey & LeBoeuf not directly involved in the case.
Wolff, who did a study of China’s clean energy policies earlier this year for a US industry group, also said his hunch was USTR would initiate a WTO case.
“There is an expectation in the Congress I think on both sides of the aisle that the administration will be forcefully enforcing trade agreements. If there’s any way in which USTR can bring a case, I think they would,” Wolff said.
The steelworkers petition outlined five areas where it said China’s clean energy policies violated World Trade Organsation rules including the restrictions on rare earth minerals.
China slashed its export quota by 40 percent this year and plans to trim it further next year. It has already announced increased export taxes on rare earths in 2011.
The United States, the European Union and Mexico brought a World

Trade Organsation case against similar restrictions imposed by China on other critical materials such as bauxite and magnesium. A decision is still awaited in that litigation.
China says it need to restrict the exports to protect the environment and conserve resources.
Steelworkers charge the curbs are a clear violation of Beijing’s commitment when it joined the World Trade Organsation to eliminate export quotas and taxes on all but a select list of products.
The steelworkers also accuse China of using illegal export subsidies to promote clean energy technology, discriminating against imported goods and foreign firms, forcing foreign investors to transfer technology and providing trade-distorting subsidies to domestic producers.
“The reason the union is so concerned is that violations are so large and in many cases so obvious,” Stewart said.
Wolff said the United States might be reluctant to go after China’s domestic support since many countries provide research and development grants to support clean energy production.
However, the steelworkers contend China’s “massive” clean energy subsidies have displaced US exports and driven down prices, making them actionable under the World Trade Organsation.

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