* US has challenged China export curbs at WTO
* Business groups split on allowing more LNG exports
* US has pledged against export restrictions in G20, APEC
By Doug Palmer
WASHINGTON, Jan 31 The United States would
violate global trade rules and damage its credibility if it
decides to subsidize steel, chemical and other manufacturers by
restricting exports of liquefied natural gas after years of
pressing other countries like China to drop restrictions on
natural resource exports, experts said.
"It would be hypocritical and contrary to WTO rules for the
United States to impose restraints on the export of LNG while
permitting unfettered domestic consumption of natural gas," said
Gary Hufbauer, a senior fellow at the Peterson Institute for
International Economics, who recently wrote about the issue for
the think tank.
The U.S. Department of Energy is considering more than a
dozen applications to export LNG as a result of breakthroughs in
drilling technology that have dramatically increased U.S. oil
and gas production.
That has triggered a fierce debate within the business
community, with industrial users like Dow Chemical and
Nucor that have benefited from lower natural gas prices
arguing against more exports.
Other business groups like the National Foreign Trade
Council and the Emergency Committee for American Trade are
pushing for a liberal export policy, fearing U.S. restrictions
could come back to haunt American firms.
Environmental groups also worry that the new drilling
techniques could contaminate water supplies and lead to more
greenhouse gas emissions that are blamed for climate change.
Hufbauer said he expected the Energy Department to decide in
favor of more LNG exports but proceed slowly with approval of
individual projects to monitor the environmental impact.
Price concerns raised by domestic natural gas users are
unlikely to carry the day because "it is so contrary to what the
United States has been arguing against other countries. I think
there would be strong forces in the U.S. government pushing back
against that," Hufbauer said.
FREE TRADE EXCEPTION
The United States generally does not restrict exports to
give domestic companies a price advantage, or subsidy, and
typically objects when other countries impose export bans.
In the case of LNG, the issue is before the Energy
Department because a 1938 law requires it to decide whether
natural gas exports are in the U.S. public interest.
Congress amended the law in 1992 to allow natural gas
exports to countries that have a free trade agreement with the
United States. That list has grown to 20 including Canada, South
Korea and Australia.
On Thursday, a bipartisan group of senators introduced
legislation that would also allow natural gas exports to the 27
nations of the European Union, Japan and other allies.
"This will expand economic opportunities across America and
help lower our nation's trade deficit. Our bill will also
promote the energy security of key U.S. allies by helping reduce
their dependence on oil and gas from countries, such as Russia
and Iran," Wyoming Senator John Barrasso said.
As recently as 2007, the United States was making plans to
expand imports of natural gas, so the issue of U.S. export
restrictions was not a serious concern.
But Jim Bacchus, a former WTO appellate judge now in private
practice at Greenberg Traurig, an international law firm, said
he felt certain U.S. export curbs would be found in violation of
the WTO if challenged by another country.
"One of the biggest recent WTO cases was one that the U.S.
brought against China's quantitative restrictions on exports of
raw materials. The United States won that case on the basis of
Article XI of the GATT," Bacchus said.
'BLUNT TRADE MEASURES'
In that dispute, the United States argued that China's
restrictions on exports of raw materials used to make steel and
other industrial products gave Chinese producers an unfair
advantage by depressing domestic prices for those goods.
"These export restraints are blunt trade measures that are,
by China's own admission ... inconsistent with WTO rules," U.S.
trade lawyers said in oral arguments in that case.
The United States is making the same point in a case that
it has brought with the European Union and Japan against Chinese
restrictions on exports of rare earth minerals used in a variety
of high-technology products.
"The export restrictions can increase supplies in China's
domestic market, driving down the prices that Chinese producers
would otherwise pay for these same inputs," USTR said in an
October 2012 legal brief.
"Not only does this dynamic create tremendous advantages for
Chinese producers vis-à-vis non-Chinese producers, but it also
places strong pressure on non-Chinese producers to move their
operations, technologies and jobs to China," USTR said.
Still, the U.S. Trade Representative's office on Wednesday
declined to say whether a Department of Energy decision to curb
additional LNG exports would violate WTO rules.
"Generally, the office would not comment on whether a U.S.
export measure that has yet to be decided might or might not
raise concerns under trade rules," a USTR spokeswoman said.
But in international venues like the Group of 20 leading
economies and the Asia-Pacific Economic Cooperation (APEC)
forum, the United States has been a driving force in crafting
language urging countries not to curb exports.
Reflecting concern that a new round of protectionism could
damage the fragile global economy, APEC leaders in October again
pledged to refrain "from raising new barriers to investment or
to trade in goods and services, imposing new export
restrictions, or implementing WTO-inconsistent measures in all
areas, including those that stimulate exports."