Morning Brief: China’s Rare Earth Policy Challenged at WTO
The United States, Europe, and Japan challenged China’s export restrictions of rare earth elements at the WTO (WSJ). The complaint alleges that the restrictions give Chinese manufacturers an unfair advantage, as these elements are essential to the production of electronic and cleantech products, while China counters the restrictions are designed to limit environmental damage. An initial ruling is expected before the end of 2012. Ninety-five percent of rare earths are mined in China. Though new mining projects are underway outside China, the country is expected to dominate production through 2016.
Separately, Chinese Premier Wen Jiabao stressed the need to continue economic and political reforms, including control over exchange rates (BBC). He also tamped down expectations by mentioning that derivatives contracts in Hong Kong indicate that the yuan’s value is likely nearing market equilibrium.
In a recent blog post, CFR’s Ted Alden discusses the limits of the WTO when trade rules conflict with important strategic objectives of large economies.
International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.
Corporate Regulation and Taxation
Examining Candidates' Tax Proposals
On the Op-Ed pages of the Wall Street Journal, Glenn Hubbard and Kevin Hassett discuss the impact of the tax reform proposals of Obama, Romney, and Santorum, specifically the international mobility of capital and how taxes affect firms’ structures and investing decisions. When taxes discourage capital investment, owners are prevented from making additional profits and workers earn less because capital investment drives the productivity gains that lead to increased wages. The authors prefer Romney’s plan.
Debating Dodd-Frank’s Complexity, Effectiveness
Almost two years after its passage, the Dodd-Frank financial regulatory act is not fully implemented and the debate about its ultimate effectiveness due to its complex nature continues. The Harvard Business Review discusses the main arguments on both sides and calls for simpler rules that are understandable and enforceable.
CFR’s Ted Alden discusses the need to reform corporate taxation to keep the United States competitive. In addition to lowering statutory rates closer to levels of the other OECD countries, the United States should move to a territorial tax system as most of the world has already done.
Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.
Debt and Deficits
Senate Holds a Hearing on Reforming Congress
Today a panel of U.S. senators will meet to discuss proposals to reform the rules of the House and Senate (WashPost). Several of the proposals to be discussed would affect the budget process, including moving from annual to two year budgets, and the “no budget, no pay” rule that would withhold congressional pay if a budget is not passed.
Debt and Deficits. Read more from experts on the challenges in reducing U.S. debt.