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United States Expands Its Challenge to China’s Export Restraints on Key Raw Materials

Washington, D.C. − U.S. Trade Representative Michael Froman announced today that the United States has expanded its challenge at the World Trade Organization (WTO) concerning China’s export restraints on raw materials.  On July 13, the United States requested consultations with the People’s Republic of China regarding its export duties on nine different raw materials.  Today, the United States has supplemented that request to include China’s export duties on chromium, as well as China’s export quotas on antimony, indium, magnesia, talc, and tin.

The raw materials that are the subject of today’s request – antimony, chromium, indium, magnesia, talc, and tin – are key inputs into high-value U.S.-made products in vital industrial sectors, including aerospace, automotive, construction, and electronics.  China’s export restraints on these materials, including duties and quotas, provide an unfair competitive advantage to China at the expense of American workers and manufacturers.   

“Today’s action again makes clear that we will not hesitate to challenge export policies that harm U.S. manufacturers by restricting their access for key inputs into products made here in America.‎ The restraints we challenged last week, along with the ones we have included today, are part and parcel of the same troubling policy – one that provides advantages for China in important manufacturing sectors at the expense of the rest of the world, said Ambassador Froman.  “We will continue to stand up for American workers and manufacturers in order to ensure a level playing field and protect the good jobs that trade supports.”

China’s export duties and quotas on these raw materials disadvantage U.S. producers by raising the prices of these raw materials for downstream manufacturers outside of China, while lowering the prices paid by China’s manufacturers that use these same raw materials.  These Chinese manufacturers are able to manufacture lower-priced goods using these unfairly priced raw materials, creating an uneven playing field for U.S. competitors.  In this way, China’s export restraints create pressures on U.S. and other non-Chinese producers to shift production operations, technologies, and jobs to China.   

Today’s action continues the Administration’s strong record of enforcing U.S. rights under our trade agreements.  Since 2009, the Administration has brought 23 enforcement actions (including this one) at the WTO, and won every single one decided thus far.  Since 2015, USTR has announced the following enforcement victories:

  • In April 2016, China signed a Memorandum of Understanding with the United States in which China agreed to take specific actions that would remove all the WTO-inconsistent elements of its “Demonstration Bases-Common Service Platform” export subsidy program.  The United States initiated a WTO challenge against the program because China was providing prohibited export subsidies through “Common Service Platforms” to manufacturers and producers across seven economic sectors and dozens of sub-sectors located in more than one hundred and fifty industrial clusters throughout China known as “Demonstration Bases,” thereby creating unfair competition for American workers and businesses. 
     
  • In February 2016, a WTO panel found in favor of the United States in a dispute challenging India’s “localization” rules discriminating against imported solar cells and modules under India’s National Solar Mission.  The WTO panel agreed with the United States that India’s domestic content requirements discriminate against U.S. solar cells and modules by requiring solar power developers to use Indian-manufactured cells and modules, in breach of international trade rules.  (India’s appeal of the panel report is pending.)
     
  • In July 2015, the United States prevailed in a WTO challenge to China’s compliance actions following WTO findings in 2012 that China’s duties on high-tech steel were inconsistent with WTO rules.  Those WTO-inconsistent duties contributed to over $250 million in annual export losses for American steel exporters.  The U.S. compliance challenge was the first time any WTO Member had initiated a WTO proceeding to challenge a claim by China that it had complied with adverse WTO findings.
     
  • In June 2015, the WTO found in favor of the United States in a dispute challenging India’s ban on various U.S. agricultural products – such as poultry meat, eggs, and live pigs – allegedly to protect against avian influenza.  The WTO agreed with the United States that India’s ban breached numerous international trade rules, including because it was imposed without sufficient scientific evidence and was not based on international standards, which confirm that importing U.S. products is safe.
     
  • In January 2015, the WTO found that Argentina’s import licensing requirements and other import restrictions breach international trade rules.  These restrictions potentially affect billions of dollars in U.S. exports each year, including exports of energy products, electronics and machinery, aerospace equipment, pharmaceuticals, precision instruments, medical devices, motor vehicle parts, and agricultural products.

BACKGROUND

China imposes export restraints on various forms of eleven raw materials: antimony, chromium, cobalt, copper, graphite, indium, lead, magnesia, talc, tantalum, and tin.  In addition to today’s action, which challenges export duties imposed by China on chromium, and export quotas on antimony, indium, magnesia, talc, and tin, on July 13, 2016, the United States challenged export duties imposed by China on antimony, cobalt, copper, graphite, lead, magnesia, talc, tantalum, and tin. 

Downstream products potentially affected by this challenge include:

China committed as part of the terms of its WTO accession to eliminate export duties for all products other than those listed in a specific annex.  The export duties the United States is challenging are imposed on products not listed in that annex. 

China also imposes export quotas on various raw materials.  Article XI:1 of the General Agreement on Tariffs and Trade 1994 (GATT 1994) generally prohibits restrictions on exports other than taxes, duties, and charges.  China’s WTO Accession Protocol also includes commitments not to restrict the right to export goods.

In two previous WTO disputes (China – Measures Related to the Exportation of Various Raw Materials and China – Measures Relating to the Exportation of Rare Earths, Tungsten, and Molybdenum), the WTO found that China’s imposition of export duties and export quotas on two different sets of raw materials was inconsistent with WTO rules.  In both cases, the WTO confirmed that China cannot justify its imposition of export duties not listed in the specific annex under Article XX of the GATT 1994, and rejected China’s attempts to justify its imposition of export quotas as legitimate conservation or environmental protection measures.  Through this new WTO action, the United States seeks to extend and reinforce the important victories obtained by the United States in those two previous WTO challenges.  

Consultations are the first step in the WTO dispute settlement process.  If the United States and China are not able to reach a mutually agreed solution through consultations, the United States may request that the WTO establish a dispute settlement panel to examine the matter.

See a copy of the consultation request letter here.