After several years, the official complaint with World Trade Organization (WTO) over China’s export restrictions of rare earth materials has finally come to a conclusion: China’s exportation policies are inconsistent with its obligations to WTO and violate international trade rules.
Precisely because China’s share of the production of rare earths has been reduced from 95% in 2010 to 80% in 2013 leading to a steady price decline, the decision has not had a significant effect on the U.S. economy yet. Many domestic industrial producers, however, still welcome the final decision from WTO. They anticipate that China’s failure in this case may help them regain the competitive edge over China’s domestic and export producers. Additionally, some politicians also claim that this triumph will remain the high-quality, middle-class jobs in the U.S.
On the other hand, some policy analysts argue that the decision could be a double-edged sword which may hurt the U.S. Over the last decade, in order to protect the domestic industrial producers, the government has been implementing a series of import restrictions on some of the critical materials by using antidumping measures. Apparently, China suffers most from the antidumping policies. Therefore, it is entirely possible that China may file a suit against America for its antidumping policies based on the logic in this case. As some economists suggest, being embedded in a global economy, countries are so highly interconnected that any tiny modification may cause significant economic fluctuation. It is time to reconsider our trade policies to create a win-win situation.
Source: Xinyuan Zou is a research associate at the National Center for Policy Analysis.