U.S., EU launch WTO case against China on raw materials

By Susan Cornwell and Darren Ennis
WASHINGTON/BRUSSELS (Reuters) - The United States and European Union are launching a World Trade Organization case against China over its export restrictions on raw materials, officials announced on Tuesday.
The action follows failure to persuade resource-hungry China to reduce its export tariffs and raise quotas on key materials such as coke, zinc and yellow phosphorus.
The materials are used in steel, microchips, planes and other products, and the trade flows affected are worth billions of dollars, U.S. officials said.
"After more than two years of urging China to lift these unfair restrictions, with no result, we are filing at the WTO today," U.S. Trade Representative Ron Kirk told a news conference in Washington.
"We are most troubled that this appears to be a conscious policy to create unfair preferences for Chinese industries" that use the materials, he said.
The United States and the European Commission -- which oversees trade for the 27-nation EU bloc -- are formally seeking consultations with Beijing at the global trade watchdog. If these talks fail, the next step would be to request a WTO panel to hear the complaint.
"It is very much hoped that we will not have to proceed to the next stage," Kirk said.
In Brussels, EU Trade Commissioner Catherine Ashton said in a statement, "The Chinese restrictions on raw materials distort competition and increase global prices, making things even more difficult for our companies in this economic downturn."
"I hope that we can find an amicable solution to this issue through the consultation process," she said.
The EU and the United States say China has continued to restrict exports of raw materials despite Beijing's pledge to eliminate export taxes and charges when it joined the WTO in 2001.
This seriously disadvantages foreign "downstream producers" of goods, since the export restraints limit their access to raw materials and raise world market prices for the materials, while lowering the prices that domestic Chinese producers have to pay, U.S. officials said.
U.S. officials said the nine materials covered by their case were bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc.
Taking action at the WTO is expected to further damage already brittle trade relations with China. U.S.-China tensions have been exacerbated by the growth in the U.S. trade deficit.
Trade disputes between Brussels and Beijing are also on the rise since the EU's trade deficit with China has ballooned. Brussels has imposed a number of anti-dumping tariffs on imports of Chinese goods ranging from shoes to steel products.
In a move that may have been an attempt to forestall U.S. and European action, Beijing had said on Monday it was cutting export taxes on a range of materials, including some used to make steel.
(Editing by David Storey)

Source: Reuters