The Rare Earth Battle

(Joseph J. Dehner, Frost Brown Todd LLC)
An immediate response of China to the US announcement that it would launch a 301 inquiry aimed at the Chinese “green” technology sector is a rare earth counter-attack. In this reported highly protectionist move, China has temporarily halted exports to the US of rare earth materials. Used in making advanced technology products, rare earth materials are a variety of scarce minerals. China currently produces 95% of the world's trade in these important items, according to a New York Times article of October 19, 2010 - K Bradsher, “China is said to halt exports to US of some key minerals.” The report indicates that this is being done without any official announcement of such an embargo aimed at any particular country. Read more here.

China Said to Widen Its Embargo of Minerals

(New York Times – Keith Bradsher)

China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted some shipments of those materials to the United States and Europe, three industry officials said this week.

The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further intensify already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese leaders are willing to use their growing economic muscle.

“The embargo is expanding” beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities. They said Chinese customs officials imposed the broader restrictions on Monday morning, hours after a top Chinese official summoned international news media Sunday night to denounce United States trade actions. Read more here.

USTR Accepts Petition Against Chinese Policies on Green Technologies but Delays Talks

(World Trade Interactive)

The Office of the U.S. Trade Representative has accepted a United Steelworkers petition and initiated a Section 301 investigation into Chinese policies on trade and investment in environmentally friendly technologies. However, USTR also said it would wait 90 days to determine whether to request dispute settlement consultations on this issue with China at the World Trade Organization. The delay suggests that there is a political dimension to the decision and leaves open the possibility that USTR could ultimately decide not to pursue the matter at all.

According to USTR, the USW petition alleges that China employs a wide range of WTO-inconsistent policies that protect and unfairly support its domestic producers of wind and solar energy products, advanced batteries, energy-efficient vehicles and other products as it seeks to become the dominant global supplier of these goods. These policies allegedly include export restraints, prohibited subsidies, discrimination against foreign companies and imported goods, technology transfer requirements and domestic subsidies causing serious prejudice to U.S. interests. USTR has now agreed to investigate whether these alleged acts, policies and practices deny U.S. rights or benefits under the General Agreement on Tariffs and Trade 1994, the WTO Subsidies and Countervailing Measures Agreement and China’s protocol of accession to the WTO.

There are several points to note about the timing and nature of USTR’s announcement, all of which should be viewed in the context of the upcoming congressional elections and the fact that trade with China has been a major campaign issue with key constituencies. Read more here.

Trade Officials Ponder China’s Rare Earth Stance

(New York Times – Keith Bradsher)

As a three-week-long Chinese suspension in exports of crucial minerals to Japan continues, American and Japanese trade officials have been considering whether to file cases against China at the World Trade Organization.

Trade lawyers say an embargo case could be brought to the WTO, although they said it might be a hard case to win because China has not acknowledged the halt in exports through any documents or public statements.

Coincidentally, Obama administration trade officials had been quietly meeting for months with executives and lawyers from a range of American industries that use rare earth elements, long before China halted shipments to Japan on Sept. 21, according to trade lawyers and Congressional and industry officials.

Many of those American industries are unhappy that China has been reducing its rare earth export quotas since 2006 and has imposed steep taxes on the exports, said Jeff Green, a Washington lobbyist for rare earth users. The export restrictions have given a competitive advantage to manufacturers in China that use rare earths to make their products, while putting foreign rivals at a disadvantage, according to a little-noticed WTO study last June. Read more here.

Canada Presses China to Stop Subsidizing Exports

(CTV News)

Canada joined a growing chorus of industrialized nations calling on China to stop keeping its currency artificially weak, warning Saturday that it could endanger the global economic recovery. Finance Minister Jim Flaherty said that China's policy of keeping the value of the yuan low will hurt manufacturers in Canada as well as the United States.

"If other countries are subsidizing their exports and we're not, then we're at a competitive disadvantage," Flaherty told a media round-table during meetings of the International Monetary Fund in Washington. "We do not want to see Canada disadvantaged by other countries unfairly taking advantage of artificially inflexible currencies."

Finance ministers and central bankers from the IMF's 187 member states are in Washington this weekend to discuss a looming "currency war," an escalating economic dispute between rich nations on one side and China and developing nations on the other. Artificially manipulating currencies may endanger the fragile global economic recovery, industrialized nations have warned. Read more here.

U.S. Presses Canada on Softwood Lumber

(American Shipper)

The United States on Friday requested consultations with Canada under the 2006 Softwood Lumber Agreement (SLA) regarding alleged unfair under-pricing of timber harvested from public lands of British Columbia.

The consultations provide an opportunity for the United States and Canada to exchange views and attempt to resolve their differences. If the matter cannot be resolved this way, then either the United States or Canada may request arbitration.

“The decision to move to consultations is intended to emphasize the importance of resolving this matter,” said U.S. Trade Representative Ron Kirk, in a statement.

To the United States, it appears that British Columbia is providing softwood lumber producers a low-cost input for their products and circumventing the SLA export measures. Read more here.

Related: Canada Says U.S. Softwood Complaint Unjustified (Reuters)

Approaching Trade War Threatens Logistics Sector

(Transport Intelligence – Thomas Cullen)

“A currency war” is how the finance minister of Brazil described the competitive devaluation between major economies over the past year. Particular attention has been paid to the Chinese currency peg to the dollar, yet a number of nations are busy selling their own currency. Switzerland, Japan and South Korea all have huge trade surpluses yet have moved to depress the value of their currency.

This sort of behaviour has provoked the anger of the US. A bill is now moving through Congress that is designed to impose sanctions on the Chinese in order to retaliate. The US Treasury Secretary Timothy Geithner has just described China’s currency policy as a “dangerous dynamic”. Even comparative neutrals such as Dominique Strauss-Kahn at the IMF and Robert Zoellick at the World Bank have criticised the Chinese over their currency strategy and the role it plays in the huge imbalances of trade. Some form of trade conflict seems likely.

Read more here. (Subscription required.)

Europe Presses China to Alter Trade Practices

(New York Times – Reuters)

The European Union pressed China on Wednesday to amend its trade practices to stop technology theft, counterfeiting and discrimination against foreign companies, after it failed to make Beijing budge on its exchange rate.

Opening a day-long meeting with Premier Wen Jiabao of China, the president of the European Commission, José Manuel Barroso, said the commercial relationship between China and the European Union, worth 327 billion euros ($453 billion) in 2009, was vital for the global economy.

Chancellor Angela Merkel of Germany, the leader of Europe’s biggest exporting country, met Mr. Wen on Tuesday evening and pledged to work for China to be granted the European Union’s coveted “market economy” trade status by 2016. That would give Beijing better protection against European antidumping penalties – a major irritant for the Chinese. Read more here.

US, Europe Join Trade Fight over Ontario’s Green Energy Plan

(CB Online – Maria Babbage, The Canadian Press)

Ontario’s green energy ambitions appear to be pitting the country’s biggest trading partners against Canada in a dispute over government subsidies for solar and wind power projects. Both the United States and the European Union want to join consultations over a trade complaint made by Japan to the World Trade Organization, saying they have a significant stake in the discussions.

Even though the dispute is with Ontario, the federal government is ultimately responsible to defend the province because Canada is a signatory to the WTO, said International Trade Minister Peter Van Loan. “We always want to maintain good trading relationships with our major partners, and we always want to make sure that our actions are World Trade Organization compliant,” he said Friday in an interview with The Canadian Press. “In this case, we certainly encourage the Ontario government to take advantage of the consultations phase of this process to seek a satisfactory resolution.”

Earlier this week, both the U.S. and the EU argued in separate letters to the WTO that they have a “substantial trade interest” in the talks. Read more here.

WTO Raps U.S. Ban on Chinese Chicken Imports

(Reuters – Jonathan Lynn)

U.S. measures that effectively banned imports of Chinese cooked chicken broke international trade rules and caused injury to China’s economy, a World Trade Organization dispute panel said on Wednesday. The U.S. measures challenged by China were unscientific and discriminatory, the panel found.

The ruling, in one of several trade disputes between China and the United States, came as the U.S. House of Representatives prepared to vote on a bill declaring China’s undervalued currency a subsidy and clearing the way for duties to be imposed on some Chinese imports as a countermeasure. Read more here.

U.S. Seeks NAFTA Panel for Mexico Dispute

(American Shipper)

The United States on Friday asked the North American Free Trade Agreement Free Trade Commission to set up a dispute settlement panel regarding Mexico’s decision not to move its “dolphin safe” labeling dispute from the World Trade Organization to NAFTA, as requested by the United States and as required by NAFTA’s Article 2005. Read more here.

Canada’s Data Undisputed on Damages Following COOL

(Country Guide)

The U.S. government hasn’t challenged Canada’s “economic evidence” of the harm caused by mandatory country-of-origin labelling (COOL), but blames “market participants” rather than COOL itself, Canada’s cattle agency reports.

Attending the first round of oral hearings in a challenge of U.S. COOL by Canada and Mexico at a World Trade Organization (WTO) dispute settlement panel, the Canadian Cattlemen’s Association said Canada’s team was solid in its preparations and professional in refuting the U.S. team’s “creative suggestions.” “We correctly anticipated the arguments the U.S. would use to defend COOL and while there were no surprises, it is clear that the U.S. intends to defend this trade barrier vigorously,” CCA president Travis Toews said in a release Friday.

According to the CCA, Washington’s defense of COOL at the dispute settlement body’s hearings in Geneva, Switzerland was to claim that COOL is designed to inform consumers, not restrict trade, and that it hasn’t directly caused any segregation or other negative impact on Canadian cattle. Canada retorted that the market reaction to COOL was “not only predictable but in fact the intended outcome of COOL’s proponents,” the CCA said. Read more here.

Canadian Farmers Challenge U.S. Labelling Requirements at WTO

(Bridges Weekly)

Canada is challenging the U.S.’s country-of-origin labelling (COOL) requirements for beef and pork at a meeting of the WTO’s Dispute Settlements Body (DSB). The Canadian government, backed by several business groups – including some from the U.S., claims that the implementation of COOL requirements is immensely costly forcing Canadian businesses to seek less money for their beef so as to absorb the cost of implementing the requirement. They maintain that COOL is a technical barrier to trade (TBT) and as such illegal under WTO law.

“The COOL measure is not intended to address health or safety concerns,” Canada said in its opening statement. “The objective of the COOL measure was to distort the conditions of competition in the U.S. market to favour U.S. cattle and hogs compared to imported livestock.”

The COOL act requires that consumers be informed of the country of origin of meat by a label on the sales package. To receive an “A” label, cattle must be born, raised, and slaughtered in the United States. Meat from cattle with a mixed life – for example, born and raised in Canada but slaughtered in the U.S. – must have a label indicating the mix. Read more here.

U.S. Takes China Trade Cases to WTO

(Industry Week – Agence France-Presse)

Trade tensions between the United States and China ratcheted up another notch on Sept. 15, as Washington called on the WTO to probe unfair Chinese trade practices. The United States asked the World Trade Organization to investigate China’s allegedly unfair treatment of U.S. steel and electronic payment providers, the first step toward sanctions.

“We are concerned that China is breaking its trade commitments to the United States and other WTO partners,” U.S. trade representative Ron Kirk said. Amid mounting U.S. anger about China’s trade policies, Kirk’s office said it would ask the WTO for “consultations” about Beijing’s policies, a step that could lead to sanctions. Read more here.

Japan Challenges Canadian Renewable Energy Incentives at WTO

(Bridges Weekly)

Japan launched dispute settlement proceedings against Canada at the World Trade Organization on September 13 by saying that the province of Ontario’s green energy plan unfairly pressures its producers of clean power to buy hardware from local manufacturers.

Specifically, Japan is challenging Ontario’s Feed-in Tariff Program (FIT), which enables the province to subsidise electricity operators that use renewable energy produced using stringent local content requirements. The “made-in-Ontario” requirement demands that up to 60% of all green energy project inputs be manufactured in the province as it strives to create local jobs. [...]

But Japan says the local-content provisions breach portions of the General Agreement on Tariffs and Trade (GATT), and fall under the definition of a “prohibited subsidy.” It has asked for “consultations” with Canada under the WTO process, the first stage of a formal trade dispute. Read more here.

Buy American, The Sequel? New Canada-U.S. Trade Battle Looms Ahead

(Lee-Anne Goodman — The Canadian Press)

Seven months after the Buy American resolution, Canadian manufacturers are poised to become ensnared in yet another protectionist piece of U.S. legislation even though the Chinese are the intended target.

Gary Doer, Canada’s ambassador to the United States, is sending a letter this week to congressional leaders, urging them to consider the impact on the Canada-U.S. trade relationship if the Foreign Manufacturers Legal Accountability Act passes Congress in the weeks to come. “As we are each other’s largest trading partner, Canada is concerned this legislation seeks to solve a problem that does not exist,” Doer wrote. “It could instead result in unintended consequences of unduly burdening our bilateral trade.”

The act, currently before the U.S. House of Representatives, is aimed at ensuring that the foreign manufacturers of defective protects can be served with legal papers. It was the result of the Chinese drywall fiasco that has damaged some U.S. homes and made homeowners sick; consequently, it isn’t expected to face many hurdles in Congress.

The act is part of a “Make It In America” initiative by nervous Democrats who are hoping it will score them points in what’s known as the Rust Belt, a manufacturing-heavy region of the Midwest and northeastern United States where exasperation about the widening trade deficit is off the charts. Rust Belt Democrats are vulnerable to defeat in the November mid-term elections less than eight weeks away. Read more here.

Tariff Wars: China Slaps Duties on US Chicken

(domain-b.com)

Amidst a gradually escalating trade war China has now imposed anti-subsidy duties on US chicken products for a period of five years, its commerce ministry said Wednesday.

The move comes hard on the heels of a decision by the US Commerce Department to impose duties on aluminium products from China (See: Tariff wars: US penalises aluminum imports from China).

US broiler and chicken products will attract tariff rates ranging from 4 per cent to 30.3 per cent, the ministry announced. It said US producers benefited from government subsidies that lowered feed prices and hurt Chinese competitors.

The tariffs apply to chicken parts and whole birds but not to live chickens or cooked products such as chicken sausage. Read more here.

Tariff Wars: US Penalises Aluminum Imports From China

((domain-b.com)

Aluminum and glossy paper manufacturers had claimed that an undervalued currency acted as a subsidy for Chinese producers allowing them to undercut American competitors.

The Commerce Department rejected these arguments.

The petition became a cause celebre of sorts with American manufacturers as the Treasury Department refused to escalate matters with the Chinese by dubbing them as currency manipulators.

US Congressional lawmakers have been pressing hard to introduce legislation that would compel the Commerce Department to act in this regard and recognise China’s currency manipulation, if it fails to act on its own.

“The Commerce Department made its finding while still managing to ignore the elephant in the room, which is China’s currency manipulation,” Senator Charles Schumer, a New York Democrat, said yesterday in a statement. “Once again, even when the opportunity is thrust into its hands, the administration has refused to take action.”

Commerce department officials said the complaints were rejected as China’s currency policy wasn’t “specific to the enterprise or industries being investigated.” Read more here.

USTR Confirms Sept. 1 Date for Eliminating Import Duty on Canadian Softwood Lumber

(World Trade Interactive)

The Office of the U.S. Trade Representative has issued a notice confirming that as of Sept. 1 it will stop collecting an additional 10% import duty on certain softwood lumber products from the Canadian provinces of Ontario, Quebec, Manitoba and Saskatchewan. The U.S. has collected this duty since April 2009 to remedy Canada’s breach of certain obligations under the 2006 Softwood Lumber Agreement. That step followed Ottawa’s refusal to comply with a February 2009 arbitral tribunal decision that Canada should collect this charge itself.

In recent months, however, the government of Canada had adopted measures to address the SLA violations and has agreed to collect the 10% export charge, effective with respect to softwood lumber products with a shipment date of Sept. 1 or later. Canada will collect this charge until the total of the amounts collected under the U.S. import duty and the Canadian export charge is equal to C$68 million. Because USTR has determined that these measures satisfactorily grant the rights of the U.S. under the SLA, it is removing the additional 10% import duty, effective with respect to imports with a shipment date of Sept. 1 or later.

Candy Makers Go After Obama over Impasse on Mexican Tariffs

(The Hill – Mike Lillis)

The nation’s candy makers this week slammed Washington policymakers for failing to settle a trade dispute with one of their most lucrative export markets: Mexico.

The impasse, the National Confectioners Association warned Friday, will ding the industry with a 20 percent tax on tens of millions of dollars worth of chewing gum and chocolate products heading south of the border. “Dozens of U.S. gum and chocolate makers large and small will immediately feel the effects of these duties,” NCA President Larry Graham said in a statement.

The concerns come in response this week’s announcement by the Mexican government that it would expand the number of products subject to new border taxes – a move designed to pressure the U.S. to allow Mexican long-haul trucks on U.S. roadways. Read more here.