By Vicki Needham - 03/13/12 03:54 PM EDT
The Obama administration on Tuesday stepped up pressure on China to loosen export restrictions on rare-earth minerals critical to the production of high-tech goods.
President Obama announced the United States would file a case in the World Trade Organization, along with the European Union and Japan, requesting talks with China over its export controls. The request is the first formal step in a WTO legal case.
"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, and that goes against the very rules that China agreed to follow," Obama said during a press conference in the Rose Garden.
The president said the restriction on rare-earth minerals is "too important for us to stand by and do nothing."
"We have to take control of our energy future and we can't let that energy industry take root in some other country because they were allowed to break the rules," he said.
While China-bashing is common during an election year, a senior administration official insisted Tuesday the timing of the WTO filing had nothing to do with the presidential election.
The official said there was a need to bring the case, and noted the involvement of the European Union and Japan to buttress the point.
Chinese officials defended the policy, arguing that reducing production is needed to limit environmental damage and conserve resources.
"We think the policy is in line with WTO rules," said Liu Weimin, a Chinese foreign ministry spokesman said at a briefing, according to news reports.
"Exports have been stable. China will continue to export, and will manage rare earths based on WTO rules," Liu said.
Political pressure to punish China for what critics say are its unfair trade practices — including an undervalued currency, intellectual property theft and indigenous innovation issues — has been building in Congress.
Sen. Charles Schumer (D-N.Y.), the lead messaging strategist for Senate Democrats, called the move a "worthwhile step" but said more must be done to stop China’s "hoarding" of rare-earth minerals.
Schumer suggested that Treasury Secretary Timothy Geithner should immediately urge the World Bank to block financing for Chinese mining projects, and the Interior Department should block Chinese-funded mining projects in the United States.
"These two steps would get China’s attention right away and force them to reconsider their unfair practices," he said.
In the WTO filing, the United States said it wants to talk about restrictions on minerals used to produce hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum and chemicals.
U.S. officials say the restrictions in China are causing "massive distortions" of the global market. The officials also said the Chinese efforts are aimed at pressuring U.S. companies to move their production facilities to China.
"China continues to make its export restraints more restrictive, resulting in massive distortions and harmful disruptions in supply chains for these materials throughout the global marketplace,” said U.S. Trade Representative Ron Kirk in a statement.
China has cut its export quotas of these minerals over the past several years to cope with growing demand at home, though the government also cites environmental concerns as the reason for the restrictions.
Sen. Chuck Grassley (R-Iowa) said the case undermines the need for the new Interagency Trade Enforcement Center created by the Obama administration.
"The cases show the United States is already capable of bringing enforcement actions without a new layer of government," Grassley said.
The White House said the new enforcement agency would be able to tackle a greater number of trade issues that arise, especially with China.
With the new case, U.S. officials said they needed to act now or risk the policy having a "crippling" effect on the industrial sector.
Under WTO rules, if the matter is not resolved through consultations within 60 days — that period began Tuesday — the United States can request the establishment of a WTO dispute settlement panel.
"We will continue fighting for a level playing field for American workers and manufacturers in order to grow our economy, and ensure open markets for products made in America," Kirk said.
House Ways and Means Committee Chairman Dave Camp (R-Mich.) said Tuesday that he supports the White House's enforcement efforts.
"The United States should not hesitate to enforce its rights at the WTO, and I hope the administration will bring additional cases to address China's barriers," Camp said in a statement.