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WTO Rules Against China in Rare Earth Minerals Trade Case

The other enforcement unit announced at the State of the Union was a trade enforcement unit designed to look at and crack down on illegal trade practices anywhere in the world that impact the United States, particularly the practices of China. Some may have noted my generally optimistic tone about this enforcement unit, and sensed a disconnect. The simple difference is that the Justice Department has proven themselves unwilling to move on things like securities fraud, while the trade arm of the Administration has actually done some significant work in investigating and raising objections to Chinese trade practices. So a dedicated unit in the trade arena just looked like a better bet. We saw another example of the Administration’s sensitivity to trade rules today with this announcement from the WTO:

The appeals panel of the World Trade Organization ruled on Monday that China must dismantle its system of export taxes and quotas for nine widely used industrial materials.

The legal setback for Beijing could set a precedent for the West to challenge China’s export restrictions on other natural resources, including rare earth metals that are crucial to many modern technologies, trade experts said.

In the closely watched case, the trade organization’s Appellate Body, its highest tribunal, ruled that China distorted international trade through dozens of export policies it maintains for bauxite, zinc, yellow phosphorus and six other industrial minerals […]

“This is a major win for the United States,” said James Bacchus, a former chairman and longtime member of the Appellate Body, who now helps lead the global trade practice in the Washington office of the law firm Greenberg Traurig.

To be clear, it’s not like the Administration has ushered in some golden era of fair trade. We know that the promises made as a condition for free trade agreements in places like Colombia have not been enforced. On this narrower issue of standing up against unfair trade practices that harm domestic exports, however, the Administration has shown leadership. And a trade enforcement unit is a good idea to uncover the other ways that nations like China game the trade rules to their advantage.

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David Dayen

David Dayen

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