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EU, US launch trade case against China
Published on: 2009-06-24
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BRUSSELS (AFP) — The European Union and the United States on Tuesday launched WTO action against China, accusing it of restricting raw materials exports to feed its domestic market.

"The European Union has today requested WTO consultations with China regarding China's export restrictions on a number of key raw materials, which it considers are in clear breach of international trade rules," the EU commission said in a statement.

In Washington, US Trade Representative Ron Kirk accused China of pursuing a "troubling" industrial policy.

The two Western powers requested World Trade Organization (WTO) dispute settlement consultations with China regarding Beijing's export restraints.

"China's measures appear to be part of a troubling industrial policy aimed at providing substantial competitive advantages for the Chinese industries using these inputs," Kirk told reporters in Washington.

European industries have raised concerns for a number of years on such export restrictions -- quotas, export duties and minimum export prices -- which China applies on key raw materials, including yellow phosphorous, bauxite, coke, magnesium, silicon metal and zinc.

These materials are used notably in the aeronautics industry or in the production of steel, chemicals and semi-conductors and some cannot be found elsewhere.

EU Trade Commissioner Catherine Ashton complained: "The Chinese restrictions on raw materials distort competition and increase global prices, making things even more difficult for our companies in this economic downturn."

She added: "I hope that we can find an amicable solution to this issue through the consultation process."

Last week China defended its moves to restrict exports of some raw materials, saying it was acting to protect the environment.

"Taxing exports of some high energy-consuming and pollutant goods is to improve the world's trade environment and China's export structure, and to further enhance environmental protection measures," China's commerce ministry spokesman Yao Jian said then.

However Kirk complained that the actions "are hurting American steel, aluminum and chemical manufacturers among other industries that desperately need these materials to make their products."

"These actions also endanger thousands of jobs in America for those employed in these important sectors," he added.

In its accession to the WTO, China agreed to restrict the number of products subject to export tariffs.

China "expressly made the commitment that it would not engage in this type of behaviour," Kirk said.

Beijing's policy appeared to be aimed at creating "unfair preferences for Chinese industries" by making raw materials cheaper to them, thereby skewing costs right along the supply chain, he added.

European industries are dependent on imports of raw materials, and are therefore vulnerable to distortions in world commodities markets.

"Currently there is no level playing field for European industry with their Chinese competitors," the commission said.

"Once these resources are placed on the market, we believe they should be available without discrimination to domestic or foreign buyers. This is not the case today."

The launch of consultations is only the first step in the litigation process at the WTO.

It is intended to explore whether an amicable solution is possible.

This can last up to 60 days and if no such solution appears then the EU commission can move to establish a WTO panel for a formal ruling in the row.

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