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Obama Challenges China over its Hold on Critical Technology Materials Obama Challenges China over its Hold on Critical Technology Materials

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Economy

Obama Challenges China over its Hold on Critical Technology Materials

photo of Kelsey Snell
March 13, 2012

The Obama administration on Tuesday escalated its economic offensive against China, launching the first stage of a formal complaint over Beijing's near total hold on materials critical to the high-tech, defense, and environmental technology sectors. 

In an election-year effort to paint himself as tough on China and a protector of American workers, President Obama said he would make a request to the World Trade Organization for formal consultations with China over restricted access to rare earth minerals.

The action is just the latest pressure point in a difficult economic relationship between Washington and Beijing, competitors who are both fighting for long-term strategic advantage across a host of economic and security issues. The administration has initiated more than a dozen WTO complaints against China. This time, the European Union and Japan joined the United States in initiating the first phase of a formal arbitration.

 

"The key is to make sure that the playing field is level and frankly sometimes it’s not," Obama said. "When it is necessary, I will take action if our workers and our businesses are being subjected to unfair practices."

Tuesday's action also reflects ongoing criticism Obama is taking on the campaign trail from GOP presidential contender Mitt Romney, who has tried to paint the president as weak on China. Romney has said one of his first priorities as president would be to formally label China as a currency manipulator and begin assessing punitive tariffs on Chinese goods.

Obama has not addressed the Romney attacks head on, instead opting to roll out a steady succession of trade enforcement initiatives and WTO action. Last month Obama announced the creation of an interagency trade enforcement office and has been exploring plans to reorient trade-related agencies to support more aggressive advocacy for U.S. exports. Since then U.S. Trade Representative Ron Kirk has been making the case on Capitol Hill and elsewhere for enforcement-driven trade.

“America’s workers and manufacturers are being hurt in both established and budding industrial sectors by these policies.  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,” Kirk said in a statement on Tuesday.  “The launch of this case against China today, along with the President’s creation of the Interagency Trade Enforcement Center, reflects the Obama Administration’s commitment to make all of our trading partners play by the rules.”

The conflict over rare earth minerals has been simmering since 2010 when China blocked shipments of the goods to Japan, sparking international outrage and handwringing over China’s near-exclusive stranglehold on rare earth trade. Though estimates vary among research groups, China exports more than 90 percent of the rare earth minerals used in global manufacturing.

Tensions over the price of the minerals have simmered since the cost of rare earths spiked in the wake of the 2010 conflict, although prices have been less volatile in recent months. Still, senior administration officials told reporters on Tuesday the complaint is based on a clear trend toward Chinese manipulation of the market. Officials said the lack of an immediate threat does not alleviate the long-term risk of allowing China to unfairly manipulate the rare earth market.

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