US, other countries file trade complaint against China

China is rationing the export of rare earth materials used in electronics and other products, the complaint says

The Office of U.S. Trade Representative, along with officials in the European Union and Japan, have filed a trade complaint against China over what they're calling unfair export restraints on rare earths and other elements used in the manufacturing of mobile phones, laptops and MP3 players.

U.S. Trade Representative Ron Kirk, along with the E.U. and Japan, requested consultations with China at the World Trade Organization over the nation's export quotas and pricing requirements on rare earth metals as well as tungsten and molybdenum, the USTR announced. The materials are used in a wide range of U.S. made products, including electronics, automobiles, petroleum, hybrid car batteries and wind turbines, the USTR said.

China produces more than 95 percent of rare earth materials, according to the U.S. Geological Survey.

Consultations are the first step in the WTO dispute settlement process, according to the USTR. Under WTO rules, if the matter is not resolved through consultations within 60 days, the parties requesting the consultation may request a WTO dispute settlement panel.

"America's workers and manufacturers are being hurt in both established and budding industrial sectors by these policies," Kirk said in a statement. "China continues to make its export restraints more restrictive, resulting in massive distortions and harmful disruptions in supply chains for these materials throughout the global marketplace."

A representative of the Chinese Embassy in Washington, D.C., didn't immediately respond to a request for comment.

China uses several types of export restraints on the rare earth materials, including export duties, export quotas, export and pricing requirements, the USTR said in a press release. The restraints artificially increase prices for the materials, the agency said.

Representative Don Manzullo, an Illinois Republican and chairman of the House Foreign Affairs Subcommittee on Asia and the Pacific, said China's actions have resulted in "skyrocketing" costs for the materials.

"We are long overdue in bringing a trade dispute against China for its restrictive export quotas and taxes on rare earth minerals critical to the manufacture of a wide range of U.S. auto, electronic, medical, and defense products," Manzullo said in a statement. "China's near monopoly over these 17 rare earth minerals and blatant disregard for the rules of international trade place our manufacturers at a crippling disadvantage in securing economic growth in high-tech industries, growing our renewable energy sector, and developing new technologies."

The U.S. also needs to look for alternative sources for the materials, Manzullo said.

TechAmerica, a technology trade group, praised the USTR for filing the complaint. "Everyone from computer manufacturers to military aircraft suppliers are seeing the supply limited and the cost driven up by the Chinese practice of rationing," TechAmerica President and CEO Shawn Osborne said in a statement. "We believe in a global marketplace but it's essential that all players use the same rulebook."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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