China loses WTO case on raw material export

Led by the US, several countries, including India, Mexico and Brazil, have won their battle against China at the World Trade Organisation (WTO) on export of raw material.

In a ruling, the WTO Appellate Body 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 China's WTO obligations.

The Appellate Body affirmed a WTO dispute settlement panel's July 2011 finding, therefore agreeing with the US 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.

"Today's report is a tremendous victory for the United States, particularly its manufacturers and workers," the US Trade Representative, Ron Kirk, said in a statement.

"The Obama Administration will continue to ensure that China and every other country play by the rules so that US workers and companies can compete and succeed on a level playing field," he said.

The export restraints challenged in this dispute include export quotas and export duties, as well as related minimum export price, export licensing, and export 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 US and other countries in the production and export of numerous steel, aluminum and chemical, and a wide range of other products, the USTR 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 US 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. The European Union and Mexico joined the US as co-complainants in the dispute.

Upon a US request, the WTO Dispute Settlement Body (DSB) 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.

Argentina, Brazil, Canada, Chile, Colombia, Ecuador, India, Japan, Korea, Norway, Saudi Arabia, Chinese Taipei, and Turkey joined as third parties in the dispute.