Rare Earth Politics, Cooperation, and the WTO

WASHINGTON – If we are to have one set of rules for international trade, they must be debated, litigated, and enforced. All the “big guys” must be made to play by the same rules. This week’s challenge of China’s rare earths trading policies by the United States, the European Union, and Japan is the first such challenge filed jointly by this trio. While the United States, Japan, and the EU are trade competitors with long histories of WTO disputes between them, they share an interest in sound global rules and in making sure China plays by the rules.

It is safe to say that no knows what the probability is of “winning” a WTO case against China over rare earths. It seems a difficult case on which to set odds. Yet, the case’s historical importance is probably already established. It demonstrates that the EU, Japan, and the United States can come together to pressure China to change its policies, if those policies do not accord with the global rules. In the longer run, all three want to trade ever more with China and still avoid near total dependence on China – or any single country – for vital materials. When such dependence exists, they want to constrain the ability of a monopoly-holder to use that dependence against them. The rare earths case follows a recent victory at the WTO over Chinese export restrictions on materials such as bauxite, zinc, and magnesium. This set of cases makes clear that raw materials involve high stakes in the global economy, and high stakes for the world’s most developed states.

There are good reasons to criticize the WTO system, particularly if you are among the poorest countries on earth. But a virtue of the system is that it keeps disputing countries negotiating with each other, and it constrains their ability to engage in trade warfare and tit-for-tat exchanges of tariffs and other penalties when governments are tempted to rally their domestic constituencies in the short-term. In this case, Chinese officials may well have defensible environmental and social reasons for their country’s export restrictions, and thus they may prevail in the cases where they failed to win the argument in the previous EU-China dispute. These are the sorts of disputes WTO adjudication procedures are meant to resolve.

But the larger point remains: WTO rules and procedures agreed to by all countries that join the organization and its treaties offer a structured, law-based system to adjudicate disputes between states – and for states to hold each other accountable to the rules to which all agreed. There are those in U.S. politics who are equally hostile to international cooperation (like that within the WTO) as they are to the growing importance of China in world politics and world trade. They should pay more attention to the facts and less attention to each other. International cooperation, based on rules shaped and shared by participating states, offers more opportunities to level the playing field and resolve differences than do podium-pounding speeches.

Stacy VanDeveer is a senior fellow at the Transatlantic Academy in Washington, DC.

The views expressed in GMF publications and commentary are the views of the author alone.

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