Sen. Brown And Portman Applaud World Trade Organization Decision To Defend American Manufacturers Against Illegal Chinese Hoarding Of Rare Earth Materials

World Trade Organization Ruling Follows Efforts by Brown and Portman to Urge Administration to Challenge China for Blocking Exports of Rare Earth Materials at the Expense of Domestic Manufacturers

WASHINGTON, D.C. — Today, U.S. Sens. Sherrod Brown (D-OH) and Rob Portman (R-OH) applauded a ruling by the World Trade Organization (WTO) that China is in violation of hoarding rare earth materials, tungsten, and molybdenum at the expense of American manufacturers. Today’s announcement follows efforts by Brown and Portman to protect Ohio workers and businesses by urging the Office of the United States Trade Representative (USTR) to initiate a WTO case against China. In March 2012, the Administration answered the senators' call and challenged China, in cooperation with the European Union (EU) and Japan, at the WTO for blocking exports of rare earth materials. This decision is the culmination of those efforts.

“This is excellent news for Ohio and American manufacturers,” Brown said. “Manufacturing is the backbone of the American economy. But in order for our industry to compete, it needs a level playing field. That means holding countries like China accountable when they violate trade policy by hoarding rare earth and other materials. The World Trade Organization’s decision will help protect American businesses and the jobs they support.”

“Manufacturing is an important part of Ohio’s economy, and I’m pleased that the trade court has ruled against China’s blatantly discriminatory behavior that hurts Ohio workers,” Portman said. “I will continue to strongly support efforts to ensure that Ohio workers are able to operate on a level playing field around the world.”

In order to hold China accountable for its unfair trade practices, Brown and Portman wrote a letter to the USTR, then Ron Kirk, in September 2011 urging him to initiate a WTO case against China for blocking exports of rare earth materials, tungsten, and molybdenum. Ohio and American manufacturers rely on rare earth materials, tungsten, and molybdenum 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 has 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 continue to fight for domestic manufacturers and their ability to compete on a level playing field against foreign competition. Last month, they applauded a ruling by the U.S. Department of Commerce (DOC) that it would protect Ohio-based companies from illegal Chinese trade practices by maintaining antidumping duties (AD) and countervailing duties (CVD) on Chinese steel pipe imports. Prior to its decision, Brown and Portman urged DOC to rule in favor of domestic steel manufacturers on a petition regarding product coverage for duties ordered on Oil Country Tubular Goods (OCTG) from China. 

In 2011, Brown authored and Portman voted for the Currency Exchange Rate Oversight Reform Act, bipartisan legislation which would use U.S. trade law to counter the economic harm to U.S. manufacturers caused by currency manipulation and provide consequences for countries that fail to adopt appropriate policies to eliminate currency misalignment. 

Brown’s and Portman’s September 2011 letter to former USTR Kirk can be read in its entirety 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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