Last week a WTO dispute settlement panel ruled that certain Chinese restrictions on exports of “rare earth” minerals are inconsistent with China’s WTO obligations and recommended that the PRC government bring its policies into compliance with the rules. The decision was hardly surprising, as export restrictions are prohibited under the WTO agreements – except under certain limited circumstances, which were not demonstrated to exist.
Formal complaints about these export restrictions were lodged in the WTO by the United States, the European Union, and Japan, whose manufacturers require rare earth minerals for production of a variety of high tech products, including flat-screen televisions, smart phones, and hybrid automobile batteries. By restricting exports, the complainants alleged, China’s actions reduce supply and raise prices abroad, putting foreign downstream manufacturers at a disadvantage vis-à-vis China’s domestic rare earth-using companies, who enjoy the effective subsidies of greater supply and lower input prices.
The WTO decision was lauded across Washington, but more for its dig on China than for its basis in principle or sound economics. Emblematic of official sentiment was the following statement from arch-import-foe-temporarily-turned-globalization-advocate, House Ways and Means Committee Ranking Member Sander Levin (D-MI):
Through the aggressive efforts of the Obama Administration, the WTO has struck down China’s efforts to block our companies from having access to key inputs. Our high-tech industries, from smartphones to medical equipment to wind turbines, depend on access to these rare earths and other chemicals. Holding China accountable, and enforcing the rules of international trade are vital to U.S. businesses and workers and key to trade expansion efforts (emphasis added).