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United States Files WTO Case Against China Over Export Restraints on Raw Materials

06/23/2009

WASHINGTON, DC - U.S. Trade Representative Ron Kirk announced today that the United States has requested World Trade Organization (WTO) dispute settlement consultations with the People's Republic of China regarding China's export restraints on numerous important raw materials.  China's measures appear to be part of a troubling industrial policy aimed at providing substantial competitive advantages for the Chinese industries using these inputs.  The materials at issue are: bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus, and zinc.  These are key inputs for numerous downstream products in the steel, aluminum, and chemical sectors across the globe.  China ranks as a top global producer of these materials.  The European Union also requested formal WTO consultations with China on this matter today.

"We are going to the WTO today to enforce our rights, so we can provide American manufacturers with a fair competitive environment and put more American workers back on the job," Ambassador Kirk said. "China is a leading global producer and exporter of the raw materials in question, and access to these materials is critical for U.S. industrial manufacturers.  The United States is very concerned that China appears to be restricting the exports of these materials for the benefit of their domestic industries, despite strong WTO rules designed to discipline export restraints.

"U.S. industries and workers can compete against anyone in the world if there is a level playing field, but China's policies on these raw materials appear to tilt that field in favor of Chinese producers," Kirk added. "We are deeply troubled at what appears to be a conscious policy to create unfair advantages for Chinese industries that use these raw materials.  Now, more than ever, we must fight against this kind of domestic favoritism."

China imposes several different export restraints, including export quotas (caps on the volume of the material that may be exported), which are generally prohibited by applicable WTO rules; export duties which China expressly agreed to eliminate when it joined the WTO; and other export related administrative measures and costs, all of which appear to be inconsistent with WTO principles.

China's export restraints can seriously disadvantage foreign downstream producers.  First, these restraints limit exporters' access to these raw materials.  Second, the restraints can significantly raise the world market prices for the materials, while lowering the prices that domestic Chinese producers have to pay.  Lower-priced downstream Chinese products derived from the materials can then enjoy an anticompetitive price advantage vis-à-vis the same products produced outside China.

"Dialogue is our preferred course of action, but despite raising this issue with China repeatedly, China has not changed its policies," Kirk said. "We are committed to enforcing our rights using all of the resources at our disposal, including the WTO. "

BACKGROUND

China imposes quantitative restrictions in the form of quotas on exports of bauxite, coke, fluorspar, silicon carbide, and zinc ores and concentrates, as well as certain intermediate products incorporating some of these inputs.  China also imposes other export restrictions through its export procedures.  Article XI:1 of the General Agreement on Tariffs and Trade (GATT) generally prohibits restrictions on exports other than taxes, duties, and charges.  In addition, China's WTO Accession Protocol contains broad commitments not to restrict the right to export goods.

China also imposes export duties on several raw materials.  China committed as part of its WTO accession to eliminate export duties for all products other than those listed in a specific annex.  Further, China committed to limit any export duties on the listed products to specified levels.  The export duties being challenged are on products not listed in the annex or are imposed at rates that exceed the annex limits.  China issued a measure that appears to reduce certain export duties as of July 1, 2009, but it does not appear to affect the duties on eight of the nine materials.

Consultations are the first step in a WTO dispute.  Under WTO rules, parties that do not resolve a matter through consultations within 60 days may request the establishment of a WTO dispute settlement panel.