WTO Rules Against China
WTO rules China unfairly protected domestic manufacturers by limiting export of raw materials
John Heilprin, The Associated Press, On Tuesday July 5, 2011, 2:31 pm EDT
By John Heilprin, The Associated Press
GENEVA - The World Trade Organization ruled Tuesdaythat China was unfairly protecting its domestic manufacturers bylimiting the export of nine raw materials that are used widely in thesteel, aluminum and chemical industries.
A WTO panel sided with the United States, EuropeanUnion and Mexico, which had each filed complaints saying China wasdriving up the prices they pay for raw materials such as coke, bauxiteand zinc by setting export duties and quotas on them.
The panel rebuffed China's argument that its exportlimits were needed to protect its environment, and said those exportrestrictions should be removed.
WTO judges concluded that "China's export duties wereinconsistent with the commitments that China had agreed to" when itjoined the trade organization in 2001.
"The panel also found that export quotas imposed byChina on some of the raw materials were inconsistent with WTO rules,"the judges said.
The judges recommended that the WTO ask China to dropthe duties and quotas. China can still appeal the panel's decision. Butif Beijing loses the case, and then doesn't comply, the parties to thecase can negotiate a settlement — or a WTO body can authorize one.
China's export restrictions have caused supplies ofsome raw materials to tighten globally, pushing prices higher andcreating an incentive to use Chinese manufacturing facilities.
But the ruling's more important effect could be that ithelps the U.S. and Europeans support another trade complaint againstChinese attempts to restrict exports of rare-earth materials that areused in many high-tech products, according to Europe's trade chief.
"This is a clear verdict for open trade and fair accessto raw materials," said EU Trade Commissioner Karel De Gucht. "It sendsa strong signal to refrain from imposing unfair restrictions to tradeand takes us one step closer to a level playing field for rawmaterials."
He added that "in the light of this result, China should ensure free and fair access to rare earth supplies."
EU officials say export prices for raw materials morethan doubled when compared with the price in China because of the exportquotas, and for some products half of the final cost to consumersdepends of the cost of those raw materials.
Other materials affected by Tuesday's ruling includefluorspar, magnesium, manganese, silicon carbide, silicon metal andyellow phosphorus. The materials have a range of uses, from protectingagainst the corrosion of steel to being used in the manufacture ofcellphones.
U.S. Trade Representative Ron Kirk called the ruling a big victory for workers and manufacturers in the U.S. and worldwide.
"China's policies provide substantial competitiveadvantages for downstream Chinese industries at the expense ofnon-Chinese users of these materials," he said.
German Economy Minister Philipp Roesler, who overseesthe largest national economy in Europe, called the ruling "a greatsuccess for Germany and the EU."
"Open markets in the worldwide trade with naturalresources are crucial for the economies of Germany, Europe and theworld," he said.
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Gabriele Steinhauser in Brussels and Juergen Baetz in Berlin contributed to this report.