WASHINGTON — The World Trade Organization’s appellate body, affirming a dispute settlement panel ruling, said Monday that China has violated global trade rules by imposing export restraints on several industrial raw materials that are incorporated in several downstream products important to the apparel, textile and beauty industries.
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The appellate body found that China’s imposition of export quotas, export licensing requirements and minimum export price requirements on a wide range of raw materials was inconsistent with its WTO obligations. The materials covered in the complaint include bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorous and zinc. Although most are used in the production of steel, aluminum and chemical products, some are incorporated in textile laminates, fiber products, cosmetics, flame retardants and contact lenses.
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“Today’s report is a tremendous victory for the United States, particularly its manufacturers and workers,” said U.S. Trade Representative Ron Kirk. “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….Today’s decision ensures that core manufacturing industries in this country can get the materials they need to produce and compete on a level playing field.”
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USTR said the appellate body’s ruling was essentially a rejection of China’s “attempts to portray its export restraints as conservation or environmental protection measures or measures taken to manage critical shortages of supply.”
Filed by the U.S. in June 2009, the WTO complaint was the first brought by the Obama administration against China. The U.S. charged that China was unfairly protecting its domestic manufacturers by placing limits on certain raw material exports, which drove up global prices, a position the WTO appellate body upheld in Monday’s ruling. The European Union and Mexico filed separate WTO complaints against China later that year, with more than a dozen other nations joining as third parties in the dispute.
“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 USTR office 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.”
Trade officials said the export restraints also create pressure on foreign producers to move their operations and their technologies to China.
Upon request by the U.S., 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.