US brings new trade case against China

WASHINGTON (AP) ? The Obama administration is bringing a new trade case against China that seeks to pressure Beijing to end export restrictions on key materials used to manufacture hybrid car batteries, flat-screen televisions and other high-tech goods.

The latest action, announced Tuesday, is part of President Barack Obama’s broader effort to crack down on what his administration sees as unfair trading practices by a rising economic power that have put American companies at a competitive disadvantage.

The U.S. asked the World Trade Organization to facilitate talks with China over its curtailment of exports of rare earth minerals. The U.S. is bringing the case to the WTO along with the European Union and Japan.

In Brussels, EU Trade Commissioner Karel De Gucht said China’s restrictions “hurt our producers and consumers in the EU and across the world.”

Obama was scheduled to speak about the WTO action from the White House Rose Garden later Tuesday.

China has a stranglehold on the global supply of 17 rare earth minerals that are essential for making high-tech goods, including hybrid cars, weapons, flat-screen TVs, mobile phones, mercury-vapor lights, smartphones and camera lenses. The materials also are used in the manufacture of tiny motors, such as those used to raise and lower car windows and in consumer electronics.

China has reduced its export quotas of these rare earth minerals over the past several years to cope with growing demand at home, though Chinese officials also cite environmental concerns as the reason for the restrictions. U.S. industry officials suggest it is an unfair trade practice, against rules established by the WTO, a group that includes China as a member.

Administration officials said Beijing’s export restrictions give Chinese companies a competitive advantage by providing them access to more of these rare materials at a cheaper price, while forcing U.S. companies to manage with a smaller, more costly supply.

“America’s workers and manufacturers are being hurt in both established and budding industrial sectors by these policies,” U.S. Trade Representative Ron 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.”

On Tuesday, a Chinese foreign ministry spokesman defended Beijing’s curbs on rare earth production as necessary to limit environmental damage and conserve scarce resources.

“We think the policy is in line with WTO rules,” said the spokesman, Liu Weimin, at a regular briefing.

He rejected complaints that China is limiting exports. “Exports have been stable. China will continue to export, and will manage rare earths based on WTO rules,” Liu said.

The spokesman noted that China has about 35 percent of rare earth deposits but accounts for more than 90 percent of global production. “China hopes other countries can shoulder responsibility for supplies and can find alternative resources,” he said.

Rare earth minerals are scattered throughout the Earth’s crust, but only in small quantities, making them hard to mine. However, rich deposits of these rare earth oxides are in China, giving it command of the market.

The U.S. has just one rare earth mining company, the Colorado-based Molycorp Inc. There are also working mines in Australia, and a proposed one in Malaysia.

With the U.S economy slowly inching its way out of recession, Obama has sought to bring a renewed focus to Chinese policies that could hinder U.S. growth.

The president used an executive order last month to create a new trade enforcement agency ? the Interagency Trade Enforcement Center ? to move aggressively against China and other nations. In announcing the new agency, Obama said it would bring “the full resources of the federal government to bear” in order to level the playing field for U.S. workers.

Former Massachusetts Governor Mitt Romney, a leading candidate for the Republican presidential nomination, has criticized Obama for not taking a stronger stand on China, specifically over Beijing’s efforts to manipulate its currency. Romney has said that, if elected, he would label China a currency manipulator on his first day in office, a move that could lead to trade sanctions against China.

Under the terms of the WTO complaint, China has 10 days to respond and must hold talks with the U.S., E.U. and Japan within 60 days. If an agreement cannot be reached within that time frame, the U.S. and its partners could request a formal WTO panel to investigate Chinese practices.


Associated Press writer Tom Raum contributed to this report.