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WASHINGTON — The Obama administration filed its first World Trade Organization case against China on Tuesday over export restraints on raw materials that it charges provide an unfair advantage to Chinese industries, while limiting access and raising costs for countries importing the goods.

This story first appeared in the June 24, 2009 issue of WWD.  Subscribe Today.


U.S. Trade Representative Ron Kirk said the U.S. requested formal consultations with China over export policies that include putting caps on the volume of raw materials that can be exported out of China, imposing duties on exports of raw goods and for a variety of other administrative measures, including export licensing and price requirements for certain categories. The European Union also requested a formal consultation with China about the same issue on Tuesday.

The materials covered by the complaint include bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus and zinc. Most of the materials are used in the production of steel, aluminum and chemical products. The downstream products that incorporate the raw goods at issue cover a wide range of items, including textile laminates, cosmetics, flame retardants, fiber products, consumer electronics, automobiles and contact lenses.

Access to the materials covered by the complaint is “critical” for U.S. manufacturers, and the USTR was troubled that the policy appeared to be a conscious effort to make raw materials cheaper for Chinese companies, Kirk said.

“China’s policies on these raw materials seem to put a giant thumb on the scale in favor of Chinese producers,” the USTR said. “It’s our job to make sure we remove that thumb from the scale. Now, more than ever, we must fight against this kind of domestic favoritism.”

If the U.S. and China fail to negotiate a solution to the problem through consultations, the U.S. would request that a WTO panel examine the issue, a step the administration hopes it will not have to take, Kirk said.

“Hopefully, this is a harbinger of things to come, that the Obama administration is going to take a much more forceful approach in terms of unfair trading practices, especially in terms of China,” said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.

Obama has said enforcement of trading rules will be a top priority for his administration.

“[The WTO case] shows that the Obama administration is willing to step up and engage in the enforcement side of the equation, as well as the negotiating side of the equation,” said Stephen Lamar, executive vice president of the American Apparel & Footwear Association.

The WTO case was filed in the midst of an escalating trade engagement between the U.S. and China over the country’s respective so-called “buy American” and “buy China” policies. Both countries have encouraged the purchase of domestic goods as part of government stimulus efforts implemented in recent months to address the global economic downturn.