US, Europe charge China with WTO violations

by M. Ulric Killion 

US Trade Representative Ron Kirk speaks about trade between the U.S. and China at a news conference in Washington, D.C., U.S., on Tuesday, June 23, 2009. 

The United States and the European Union on Tuesday filed complaints with the WTO over Chinese restrictions on the export of key industrial raw materials, such as coke, bauxite, fluorspar, magnesium, silicon metal, yellow phosphorus and zinc. 

The response from Kirk is that: "China's policies on these raw materials put a giant thumb on the scale in favor of Chinese producers," and "It's our job to make sure we remove that thumb" (Bloomberg, 2009). (WSJ: Bloomberg News/Landov). 

The two countries, the US and EU, allege that China failed to reduce its export tariffs and raise quotas on these industrial raw materials, and that China's export restrictions created an unfair advantage for Chinese industries. All of this, as alleged by both the US and EU, distorted world competition, thereby violating the WTO rules.

"U.S. steelmakers and unions complain that cheap government loans, tax rebates and grants give Chinese manufacturers an unfair advantage" (Bloomberg, 2009). "USTR officials told reporters that the two complaints filed separately by the EU and the U.S. highlight the importance of this dispute" (WSJ, 2009).

According to China's Ministry of Commerce, the policy of limiting exports of these raw materials aims to protect the environment and natural resources and therefore "is in accordance with WTO rules" (Bloomberg, 2009). In the interim, as the Wall Street Journal (WSJ, 2009) reported, on Wednesday, China also announced the filing of its own challenge to a US ban on the imports of Chinese poultry.

Both the US and European Commission are formally seeking consultations with China. Given the WTO's dispute settlement procedures, should these talks fail, the next step would be to request a WTO panel to hear the complaint after 60 days.

In addition, the critical importance of this particular trade dispute is that it is the first case initiated under the Obama administration, which could potentially affect Sino-US trade relations. [US Trade Representative Kirk] "said it does seem somewhat 'counterintuitive' that the Obama administration's first WTO complaint involves allegations that China isn't exporting enough" (WSJ, 2009).

Sources:

China Defends Curb on Exports, WSJ, June 24, 2009.

US, EU file WTO case over Chinese raw materials, Agencies, June 24, 2009.

China Says Raw-Material Export Limits Meet WTO Rules, Update 2, Bloomberg, June 24, 2009.

U.S., Europe File Trade Complaint Against China, WSJ, June 24, 2009.

Copyright © Protected - All Rights Reserved M. Ulric Killion, 2009.