US threatens China with WTO case on rare earth exports

Last Updated: Fri, Dec 24, 2010 03:20 hrs

Washington, Dec 24 (DPA) US trade officials Thursday threatened trade action against China over exports of rare earth materials, one day after embarking on a separate case before the World Trade Organization (WTO) against wind power subsidies.

The office of the US Trade Representative (USTR) also accused China of a 'troubling trend' towards state intervention into its economy in recent years, according to an annual report to the US Congress on China's compliance with the WTO's rules.

The USTR said the US and other trading partners have

expressed concerns over China's limits on exports of rare earths that are found almost exclusively in China and are demanded by technology companies.

'But to date China has not been willing to change its policies,' the USTR wrote. The US would continue 'vigorous engagement with China on this issue and will not hesitate to take further actions, including WTO dispute settlement, if appropriate'.

The warning comes after Trade Representative Ron Kirk Wednesday said the US was launching its first action against China over clean energy. The US began formal consultations before the WTO - the first step in a trade case - over what it considers illegal subsidies for wind turbine manufacturers in China.

Economic relations between the two global powers remain strained as trade has grown in past years. The US exports more goods to China than any other country outside of North America, but President Barack Obama has pushed for more liberalization in China by stepping up action before the WTO since he entered the White House in early 2009.

The USTR praised China for taking actions to liberalize its economy since joining the WTO in 2001. But those efforts 'began to slow' in 2006, and China had yet to implement all its commitments under the WTO.

The result was that China sill maintained 'industrial policies that rely on excessive, trade-distorting government intervention intended to promote or protect China's domestic industries and state-owned enterprises'.

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