Unbalanced_Feature_03-2014

When it comes to trade, are rare earth metals any different from LNG?

The United States won a big victory for free trade this morning when the World Trade Organization upheld the U.S. challenge to China’s restrictions on the export of rare-earth metals.

The Obama administration should be applauded for pursuing this case. U.S. Trade Representative Michael Froman said the White House would “go to the mat for American workers and businesses to make sure that the playing field is fair and level.” That’s absolutely right.

UnbalancedFroman explained the administration’s motivation to press its case before the WTO:

China’s decision to promote its own industry and discriminate against U.S. companies has caused U.S. manufacturers to pay as much as three times more than what their Chinese competitors pay for the exact same rare earths.  WTO rules prohibit this kind of discriminatory export restraint and this win today, along with our win 2 years ago in an earlier case, demonstrates that clearly.

On a similar issue, however, it’s worth asking what makes China’s rare-earth metals protectionism any different from what the Obama administration is doing on liquefied natural gas (LNG) exports.

The administration’s exceedingly slow approach to permitting, which currently leaves more than two dozen proposed LNG export projects languishing in application limbo, serves the narrow, protectionist aims of a group of domestic energy consumers that I have written about before.

Curiously, one of those companies actively supported the U.S. case against China over rare earth metals. But when it comes to American LNG, it sings a different tune.

The administration’s go-slow policy is squandering commercial opportunities for American companies. At the same time it is denying the economy the stimulus that numerous experts claim will be generated by a liberalized policy that is consistent with trade in other domestic products.

Today’s rare-earths decision is particularly timely, coming just one day after the former chairman of the World Trade Organization’s appeals panel warned a congressional committee that the Obama administration’s approach to LNG exports likely violates WTO rules.

Let’s hope the administration recognizes the inconsistency of differing approaches on trade. It should grant approval to all of the proposed projects that are awaiting review, and let the market determine which ones will go forward. That would make sure “the playing field is fair and level,” to use Ambassador Froman’s words.

And it just might spare the United States a rebuke from the very same WTO that the administration this morning commended.


  • Worth a deeper look...