The Office of the U.S. Trade Representative (USTR) last week initiated World Trade Organization (WTO) consultations regarding China’s export restraints of key industrial minerals. The minerals at dispute are tungsten, molybdenum and a group of 17 rare earth minerals composed of lanthanides, scandium or yttrium. The dispute concerns these minerals in various forms that fall within more than 100 tariff codes.
Affected sectors include electronic products (including consumer technology such as cell phones and computers), steel, fuel, chemical production, automobiles and green goods (e.g., solar panels, wind power turbines, hybrid/electric cars, batteries, magnets, electric generators and motors). China has an overwhelming market share in producing these minerals, and many U.S. businesses therefore depend on China for supply. Companies using these minerals would benefit from elimination of China’s rare earth export restraints.
According to USTR, China maintains a number of restrictions on the minerals, including export duties and quotas, pricing requirements. (See our earlier update on China’s export restrictions on rare earth minerals.) USTR alleges that China’s restraints artificially and unfairly inflate the cost of production for U.S. companies that rely on these minerals, and that they encourage companies to move production facilities from the United States to China.
USTR’s request for consultations begins a WTO process that could result in a formal finding that the export restraints are WTO-inconsistent. This finding would lead either to removal of the restraints or to U.S. countermeasures against China within three to four years.
The case follows a successful U.S. challenge in the WTO against China’s export restraints on nine other minerals (bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorous and zinc). It remains to be seen whether China will fully comply with the WTO’s findings in the earlier case.
Companies relying on tungsten, molybdenum or rare earth minerals may wish to participate in or monitor the dispute.