Sens. Brown, Portman Urge President's Top Trade Adviser to Take China to World Trade Court

WASHINGTON, D.C.—U.S. Sens. Sherrod Brown (D-OH) and Rob Portman (R-OH) are urging the Obama Administration’s top trade advisor, U.S. Trade Representative Ron Kirk, to protect Ohio manufacturers by initiating a World Trade Organization (WTO) case on China’s hoarding of rare earth materials.  Recently, the WTO—in a suit initiated by the Obama Administration—ruled that China was unfairly restricting exports of raw materials, but the WTO did not specifically address rare earths.    

“In addition to manipulating its currency and evading tariffs, China’s hoarding of rare earth materials is yet another unfair and illegal violation of international trade laws that puts Ohio manufacturers at a disadvantage. Our manufacturers can compete with anyone, but when countries like China hoard materials, that’s not competing – it’s cheating,” Brown said. “American businesses that rely on these materials shouldn’t be forced to pay excessively high tariffs, and we should do all we can to keep manufacturing jobs here in the United States—not watch them move abroad to China. That’s why Ambassador Kirk should initiate a WTO case against China and hold it accountable for its actions.”

“Just as we did when I served as U.S. Trade Representative, the United States needs to hold China accountable for their unfair trade practices which put Ohio manufacturers at a disadvantage,” said Portman. “We are simply asking that the U.S. government enforce international trade law to end China’s unfair quotas on rare materials necessary to manufacture numerous products. It is critical that the Chinese eliminate quotas on rare earth materials so that the Ohio industries reliant upon them are not negatively impacted.”

Ohio and American manufacturers rely on rare earth materials for the production of a number of products, including wind turbines, lighting, and electronics. China currently accounts for 97 percent of the world’s supply of these materials, and have imposed quotas and heavy tariffs on their export, putting American manufacturers at a severe disadvantage.  As a result, China’s policy unfairly incentivizes American manufacturers to move production to China. Brown and Portman, in a letter sent last week, are encouraging Kirk to initiate a WTO case to protect Ohio manufacturers from China’s unfair practices and help preserve American manufacturing jobs.

“In our travels throughout Ohio, we repeatedly hear concerns about China’s policies that place U.S. manufacturers at an unfair disadvantage.   China’s restrictions on rare earth materials are of one those concerns,” Brown and Portman wrote. “China is […] artificially using these tariffs and quotas to raise the cost of rare earth materials internationally while keeping them low domestically.  As a result, businesses are forced to choose between paying artificially high export tariffs or moving production to China.  Such an approach threatens American jobs and places Ohio producers at an unfair disadvantage.”

GrafTech International Chairman and CEO Craig Shular said, “As an Ohio based manufacturing company with roughly 80% of our sales outside of the United States, GrafTech has a keen interest in protecting our ability to compete aggressively in the global marketplace. Obtaining key raw materials at a reasonable cost is critical to our mission.”

Brown and Portman also expressed concern over the impact that China’s rare earth hoarding has on Ohio manufacturer’s ability to remain profitable. “Rare earth quotas significantly affect companies’ bottom-lines. Ohio companies, such as The Electrodyne Company have seen their costs go up dramatically in recent months.  Over the past ten years, Electrodyne’s sales have quadrupled, but their continued success is threatened given that the market for rare earths has turned into a spot price market,” the senators continued.

The full text of the letter is below.

Dear Ambassador Kirk:

We are writing to urge you to initiate a case at the World Trade Organization (WTO) against China for its policies on rare earth materials.  These protectionist policies – which include quotas limiting the amount of rare earth materials that can be exported and imposing onerous tariffs on them – unfairly undermine the competiveness of manufacturers in Ohio and throughout the nation.  Furthermore, these policies apparently have support at the highest levels of China’s government.

On July 5, the WTO ruled that export restraints imposed by China on several raw materials are inconsistent with obligations China committed to by joining the WTO. We applaud your litigation of the case, and believe it has significant ramifications for China's dominance over global supplies of rare earth materials.  As you are aware from your visit to Cleveland in April, Ohio and American manufacturers are highly dependent on rare earth materials to make end products in many sectors ranging from wind turbines, to lighting, electronics, and aviation. Currently, China accounts for 97 percent of the world’s supply of rare earth materials and these quotas give it complete control over the market.

Ohio is home to some of the world’s strongest and most innovative manufacturers.  From the defense industry, to aviation, to clean energy, Ohio manufacturing strength relies on a skilled workforce, cutting edge technology, and continually updating processes. The ability to access rare earth materials is also of critical importance to Ohio manufacturing.

In our travels throughout Ohio, we repeatedly hear concerns about China’s policies that place U.S. manufacturers at an unfair disadvantage.   China’s restrictions on rare earth materials are of one those concerns.

In arguing its recent case before the WTO, China argued that its restrictions on the export of raw materials were based upon environmental and public health concerns.  The recent WTO ruling rejected these specious arguments as China’s restrictions only applied to export of raw materials while unfettered domestic production or consumption of those same minerals was not implicated. Clearly, this policy is solely in place to ensure that China becomes the dominant force in all the secondary businesses that rely on raw materials to make their products.

Unfortunately, China is pursuing the exact same policy to the export of rare earth materials and is artificially using these tariffs and quotas to raise the cost of rare earth materials internationally while keeping them low domestically.  As a result, businesses are forced to choose between paying artificially high export tariffs or moving production to China.  Such an approach threatens American jobs and places Ohio producers at an unfair disadvantage.

Rare earth quotas significantly affect companies’ bottom-lines. Ohio companies, such as The Electrodyne Company have seen their costs go up dramatically in recent months.  Over the past ten years, Electrodyne’s sales have quadrupled, but their continued success is threatened given that the market for rare earths has turned into a spot price market. 

We urge you to continue litigating on the general issue of raw materials and ask you to consider initiating a WTO case on rare earth materials, which is crucial for jobs in Ohio and across our country. 

Thank you for your attention to this matter, and we look forward to your reply.

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