China Trade Fight
U.S. Brings Complaints Against China to WTO

The headaches just don’t end for Beijing as it struggles to manage its bloated export industry. Following last month’s green light for U.S. Steel to seek a ban on import of heavily subsidized Chinese steel, the Obama administration now has other Chinese commodity exports in its crosshairs. The Wall Street Journal reports:

The U.S. accused China of failing to remove export duties on certain raw materials as the country agreed to when it entered the World Trade Organization 15 years ago, the latest in a series of trade disputes between the two.

China has kept export duties ranging from 5% to 20% on antimony, cobalt, copper, graphite, lead, magnesia, talc, tantalum and tin, U.S. officials said on Wednesday in a new WTO challenge filed against Beijing.

The duties, levied on shipments out of China, have the effect of making the minerals cheaper within the country, promoting manufacturing there in areas ranging from electronics to automobiles, while making the minerals relatively more expensive outside China.

The Chinese have agreed to discussions, but if negotiations fail, the U.S. could try to impose trade sanctions through a dispute-resolution process. Even if the U.S. complaint does not result in such action, however, the WTO challenge builds on a rising count of punitive tariffs on Chinese products. We are already seeing those early measures evolve into sweeping bans and challenges to entire sectors. Meanwhile, the current candidates in the 2016 presidential elections provide little hope for China that easier times are on the horizon.

In many ways, Beijing is beginning to see its bills come due. Despite talk of reform, China has been reluctant to shutter many money-losing manufacturing plants. Instead, trade manipulations and mountains of subsidies have propped up inefficient firms. Those practices have turned out not only to carry a budgetary cost; they also damage China’s international standing. The debt bubble is cause for concern, but the souring of long-term trade relations is equally bad news for Beijing.

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