WTO slaps China's export restraints

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American Shipper Feb 01, 2012

The World Trade Organization Appellate Body on Monday found China’s export restraints on several industrial raw materials used as key components in the steel, aluminum, and chemicals industries to be inconsistent with the country’s WTO obligations.

The Appellate Body affirmed a WTO dispute settlement panel’s July 2011 finding, agreeing with the United States and rejecting China’s attempts to portray its export restraints as conservation or environmental protection measures or measures taken to manage critical shortages of supply.

U.S. Trade Representative Ron Kirk called the WTO’s report “a tremendous victory for the United States” and said the Obama administration will “continue to ensure that China and every other country play by the rules so that U.S. workers and companies can compete and succeed on a level playing field.”

The export restraints challenged in this dispute include export quotas and duties, as well as related minimum export price, licensing, and quota administration requirements. The raw materials at issue include various forms of bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus, and zinc.

“Export restraints on these types of industrial products can skew the playing field against the United States and other countries in the production and export of numerous steel, aluminum and chemical, and a wide range of other products,” the Office of the U.S. Trade Representative said. “They can artificially increase world prices for these raw materials while artificially lowering prices for Chinese producers.

“This enables China’s domestic producers to produce lower-priced products from the raw materials and thereby creates significant advantages for China’s producers when competing against U.S. and other producers, both in China’s market and other countries’ markets. Such export restraints can also create substantial pressure on foreign producers to move their operations and, as a result, their technologies to China,” USTR said.

U.S. trade groups voiced support for the WTO Appellate Body's report.

“Export restrictions such as those by China cited in this case are a form of protectionism, disrupting global supply chains with the potential to create artificial shortages and raise world prices of downstream goods – ultimately undermining the integrity of the trading system," the National Foreign Trade Council said.

“Today’s ruling also has implications beyond its immediate impact because of other raw material export restrictions on rare earth minerals that China maintains," NFTC said. "These raw materials are vital in the production of technology-based inputs to an increasing number of everyday products, making this an issue that affects a broad swath of U.S. technology-based companies.”

The European Union and Mexico joined the United States as co-complainants in the dispute. Upon a U.S. request, the WTO Dispute Settlement Body will adopt the panel and Appellate Body reports within 30 days and call for China to bring its measures into compliance with its WTO obligations.

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