US, EU, Japan escalate rare earth dispute with China

The Office of U.S. Trade Representative (USTR), along with the European Union and Japan, has asked the World Trade Organization (WTO) to establish a dispute settlement panel to rule on U.S. claims over China's "unfair" exports of rare earth materials.

In a press statement on Wednesday, U.S. Trade Representative Ron Kirk noted that rare earth is key to several U.S. manufacturing sectors and American-made products including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum and chemicals.

Thus, it is essential that U.S. workers and manufacturers get "fair and equal access" to raw materials like rare earth, which China agreed to when it joined the WTO, Kirk explained.

With China the leading global producer of rare earth materials, its export restraints gives it the ability to affect global supply and pricing, which may provide advantages to China's downstream producers but to the detriment of U.S. and other foreign counterparts. One negative by-product of existing export policies is added pressure on foreign producers to move their operations, jobs and technologies to China, the USTR noted in the statement.

"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," the agency said.

This follows a March complaint by all three parties, which alleged that China's export restrictions on rare earth materials violated international trade rules. China then said it would deal with the dispute within the WTO's legal boundaries. According to the USTR, the three parties subsequently held consultations with China on this matter on Apr. 25 and Apr. 26 this year but left without any resolution.