15 March 2012 17:23 [Source: ICIS news]
By Joe Kamalick
WASHINGTON (ICIS)--The ?xml:namespace>
In announcing the WTO complaint, US trade representative Ron Kirk said that “
The 17 chemical and mineral substances known as rare earths also are crucial to the manufacture of weapons and space systems, lasers and fibre optic communications, to name but a few applications.
Despite the name, rare earth elements (REEs) are not actually rare – most of them are found in almost any soil around the world – but extremely rare are those areas in which these substances can be found in concentrations that make mining them commercially feasible. China supplies about 95% of rare earth elements worldwide.
In addition to a variety of restrictions imposed by
The new multinational charges against
They also followed charges levelled at
Citing the earlier WTO findings on
In addition to the key role played by these restricted materials – often as catalysts, in petrochemicals production and refining – rare earths and the other two metals are critical to the manufacture of such products as hybrid auto batteries, wind turbines, steel and advanced electronics.
In the action filed on Tuesday, the
That request for consultations is the first formal step in the WTO dispute-resolution process.
If those talks do not produce satisfactory results within 60 days, the
Perhaps more significant than the new WTO complaint, Congress this week passed and President Barack Obama signed into law a bill, HR 4105, that amends the US Tariff Act in a way that allows the US to begin imposing countervailing duties on imports of goods from non-market countries that subsidise the production or export of those goods.
The original 1930 Tariff Act exempted non-market countries – such as Communist command-economy nations – from US countervailing duties on the grounds that the economy of such a country is essentially a single entity.
In other words, the output of a non-market economy is wholly subsidised, as the national government more or less controls everything.
Application of countervailing duties against imports from a non-market economy, it was reasoned in the 1930 statute, would produce absurd results, effectively barring that country’s products entirely.
The Obama administration had previously tried to impose countervailing duties on some China-made products using a different statute, but in December 2011, a federal appellate court ruled that bypassing the Tariff Act was illegal.
In turn, this prompted broad bipartisan support in Congress for HR 4105 to amend the Tariff Act.
That change received broad support because over the last several years – especially during and even after the 2008–2009 recession – public sentiment has grown against
Aggravating that growing public hostility is the fact that the quadrennial
Given the tenor of the times, Obama could not have vetoed HR 4150, even if he had wanted to do so. He would probably have been blasted for being “soft” on
But making Chinese exports now subject to countervailing duties could elevate what has been a fairly low-key, tit-for-tat US-China exchange of WTO charges and counter-charges into a much wider and more consequential trade war between the two major economies.
Daniel Ikenson, a senior trade policy analyst at the conservative Cato Institute in Washington, DC, predicts that by enacting HR 4105, the US will “likely spark harsh reprisals from Beijing in the form of retaliatory tariffs and other market restrictions” because ending China’s status as a non-market economy under US law will be “perceived as a direct affront to Chinese exporters”.
The first shot might well have been fired in what could become a growing transpacific trade war.
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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