Obama files trade case against China, warns Beijing on ‘skirting the rules’

Olivier Knox
March 13, 2012

President Barack Obama on Tuesday vowed to defend U.S. workers from unfair competition and bluntly warned China to play by the rules of global trade as he announced that the United States, the European Union and Japan were joining forces to bring a commercial dispute with Beijing to the World Trade Organization (WTO).

"Our competitors should be on notice: You will not get away with skirting the rules," he said in the White House Rose Garden.

Amid election-year polls showing Americans give Obama poor grades on his handling of the still-fragile economy, the president vowed to "keep working every single day to give American workers and American businesses a fair shot in the global economy."

The new trade case against China focuses on so-called "rare earth materials" vital to manufacturing a range of high-tech consumer goods like flat-screen TVs, smartphones, laptops and hybrid cars, as well as making some advanced weapons like missiles.

China produces at least 90 percent of "rare earths," and U.S. officials charge that it imposes export restrictions that unfairly raise the prices paid by non-Chinese firms that need those raw materials, making these less competitive on global markets.

"We want our companies building those products right here in America. But to do that, American manufacturers need to have access to rare earth materials which China supplies. Now, if China would simply let the market work on its own, we'd have no objections. But their policies currently are preventing that from happening," Obama said, stressing that the high-tech manufacturing at stake is "too important for us to stand by and do nothing."

The decision struck another blow at China at a time when U.S. lawmakers and other critics of Beijing accuse the rising economic giant of unfair competition that costs U.S. jobs, notably in manufacturing.

Obama insisted that he had escalated the dispute, starting a 60-day clock for consultations under WTO rules after exhausting other avenues, but made no apology for the move.

"I will always try to work our differences with other countries. We prefer dialogue, and that's especially true when it comes to key trading partners like China," he said. But "when it is necessary, I will take action if our workers and our businesses are being subjected to unfair practices."

"We have the best workers and the best business in the world. They turn out the best products, and when the playing field is level, they'll always be able to compete and succeed against every other country on earth. But the key is to make sure that the playing field is level, and frankly, sometimes it's not," Obama said.

China defended its policies as in line with WTO rules and as necessary for environmental reasons.

But the dispute is one of many economic disagreements between China and the United States. Washington accuses Beijing of keeping its currency artificially cheap against the dollar, giving its exporters an unfair edge against their U.S. competitors. U.S. officials also complain that China tolerates rampant intellectual property theft, and have condemned Beijing's "indigenous innovation" policies that give domestic firms preferential treatment when it comes to government contracts.

Obama raised such issues during a Valentine's Day visit by Chinese Vice President Xi Jinping.

"We want to work with China to make sure that everybody is working by the same rules of the road when it comes to the world economic system, and that includes ensuring that there is a balanced trade flow between not only the United States and China, but around world," the president said as they met in the Oval Office.

And Obama also recently created a special task force to challenge unfair trade practices, a move largely seen as focused on China.

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