US and EU seek trade probe of China raw material curbs
Saturday, 07 Nov 2009
Bloomberg reported that the US and the European Union asked the World Trade Organization to probe Chinese taxes on exports of raw materials used in the metals and chemical industries escalating a third joint complaint against China.
The US and the EU said the duties discourage the export of commodities including coke, bauxite and manganese that are critical for US and European manufacturers while keeping them cheaper and available in China.
Trade tensions with China have grown after the worst economic crisis since the Great Depression crushed global exports, leading the WTO to forecast a 10% drop in goods trade this year. Mr Pascal Lamy the WTO director general said that the threat of protectionism may linger for another two years as countries attempt to protect jobs in domestic industries.
Mr David Cohen an economist at Action Economics in Singapore said “This is another sign of trade tensions around the world. There is tension but it’s yet to get out of hand it’s a far cry from the 1930s when protectionism clearly aggravated the collapse in trade.”
He said that China pegging its currency to the dollar was a more fundamental issue for major nations to tackle. The central bank has kept the yuan close to 6.83 per dollar since July 2008 helping to shelter exporters from the crisis.
China Ministry of Commerce said the raw material restrictions are designed to protect the environment and ensure efficient usage of the resources. China intends to resolve the dispute according to WTO rules.
The ministry said the raw materials at issue which also include magnesium, fluorspar, silicon metal, silicon carbide, yellow phosphorous and zinc, account for a very small proportion” of trade between China and the EU and the US. It said “Foreign demand for these products has declined this year. The US and the EU exaggerated the effects of such limits.”
China requires exporters to pay fees and meet minimum export prices and subjects domestic companies and foreign invested business to different criteria. It also makes the right to export contingent on having done so previously.
According to the US WTO rules generally prohibit export restrictions other than taxes, duties and charges. When China joined the WTO in December 2001, it pledged to scrap all taxes and charges applied to exports on all but 84 products. The EU and the US say the raw materials they’re targeting aren’t among those 84 exceptions.
1. Avoiding Protectionism
Officials from the US and China ended trade talks in Hangzhou last month with a pledge to steer clear of protectionism, underscoring an effort to resolve disputes between the two economies.
US President Mr Barack Obama, who’s visiting China this month, imposed duties on Chinese automobile tires in September, prompting China to complain to the WTO. US tariffs on steel pipes and a Chinese plan to investigate auto imports from the US have added friction.
Disputes between the EU and China include anti-dumping duties imposed on Chinese screws and bolts. The WTO agreed last month to investigate China’s complaint that the measures are discriminatory.
2. Higher Global Prices
European Trade Commissioner Catherine Ashton said “China restrictions on raw materials continue to distort competition and increase global prices, making conditions for our companies even more difficult in this economic climate. The nation is either a major supplier or the only source of the raw materials at issue.”
Mexico also joined the request by the US and the 27 nation EU for the WTO to set up a panel to determine the legality of the export curbs.
Chinese exports dropped more than 15% in September after tumbling 23.4% in August. Exports from the 16 nation euro region were down 5.8% in August from July the biggest decline in seven months. Exports from the euro area to the US the region second biggest trading partner after the UK fell 20% in the first seven months of 2009.
The US Trade Representative’s office said the call for WTO judges to rule came more than four months after the US and EU filed a request for consultations, setting off discussions with China. The WTO dispute settlement body will consider the request for the establishment of a panel of judges at its November 19th meeting.
