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US Brings New Rare Earths Trade Case Against China

The Obama administration hopes to pressure China to end its export restrictions on key materials used to manufacture high-tech goods.

WASHINGTON (AP) — The Obama administration is bringing a new trade case against China that seeks to pressure the rising economic power to end its export restrictions on key materials used to manufacture hybrid car batteries, flat-screen televisions and other high-tech goods.

The new trade initiative being announced Tuesday is another effort aimed at leveling the playing field for U.S. companies.

Senior Obama administration officials said the U.S. will ask the World Trade Organization to facilitate talks with China over its curtailment of exports of rare earth minerals. The U.S. is bringing the case to the WTO along with the European Union and Japan.

Tuesday morning, the EU announced its participation in the case. In Brussels, EU Trade Commissioner Karel De Gucht said China's restrictions "hurt our producers and consumers in the EU and across the world."

Obama was scheduled to speak about the WTO action from the White House later Tuesday, according to theU.S. officials, who requested anonymity in order to speak ahead of the president.

The fresh action is part of President Barack Obama's broader effort to crack down on what his administration sees as unfair trading practices by China that have put American companies at a competitive disadvantage.

China has a stranglehold on the global supply of 17 rare earth minerals that are essential for making high-tech goods, including hybrid cars, weapons, flat-screen TVs, mobile phones, mercury-vapor lights, smartphones and camera lenses. The materials also are used in the manufacture of tiny motors, such as those used to raise and lower car windows and in consumer electronics.

China has reduced its export quotas of these rare earth minerals over the past several years to cope with growing demand at home, though Chinese officials also cite environmental concerns as the reason for the restrictions. U.S. industry officials suggest it is an unfair trade practice, against rules established by the WTO, a group that includes China as a member.

The senior administration officials said Beijing's export restrictions give Chinese companies a competitive advantage by providing them access to more of these rare materials at a cheaper price, while forcing U.S. companies to manage with a smaller, more costly supply.

On Tuesday, a Chinese foreign ministry spokesman defended Beijing's curbs on rare earth production as necessary to limit environmental damage and conserve scarce resources.

"We think the policy is in line with WTO rules," said the spokesman, Liu Weimin, at a regular briefing.

He rejected complaints that China is limiting exports. "Exports have been stable. China will continue to export, and will manage rare earths based on WTO rules," Liu said.

The spokesman noted that China has about 35 percent of rare earth deposits but accounts for more than 90 percent of global production. "China hopes other countries can shoulder responsibility for supplies and can find alternative resources," he said.

Rare earth minerals are scattered throughout the Earth's crust, but only in small quantities, making them hard to mine. However, rich deposits of these rare earth oxides are in China, giving it command of the market.

The U.S. has just one rare earth mining company, the Colorado-based Molycorp Inc. There are also working mines in Australia, and a proposed one in Malaysia.

With the U.S economy slowly inching its way out of recession, Obama has sought to bring a renewed focus to Chinese policies that could hinder U.S. growth.

Obama used an executive order last month to create a new trade enforcement agency — the InteragencyTrade Enforcement Center — to move aggressively against China and other nations. In announcing the newagency, Obama said it would bring "the full resources of the federal government to bear" in order to level the playing field for U.S. workers.

Under the terms of the WTO complaint, China has 10 days to respond and must hold talks with the U.S., E.U. and Japan within 60 days. If an agreement cannot be reached within that time frame, the U.S. and its partners could request a formal WTO panel to investigate Chinese practices.

The WTO, the only global international organization dealing with the rules of trade between nations, has sided with the U.S. in previous trade disputes with China.

In 2009 the Obama administration imposed a three-year tariff, starting at 35 percent, on U.S. imports of low-grade Chinese tires. The tariff was approved after imports of those tires rose threefold to about 46 million tires between 2004 and 2008. Last year the WTO rejected an appeal from China and found that the United States acted consistently with its obligations in imposing the duties.


Associated Press writer Tom Raum contributed to this report.

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