The European Union filed a World Trade Organization case against China on Tuesday over duties and other measures concerning the export of certain raw materials, including ones used in polyester and cosmetics manufacturing.
In its request, the EU alleges that the duties, quotas and other restrictions are inconsistent with China’s Protocol of Accession and other WTO provisions.
“We cannot sit on our hands, seeing our producers and consumers being hit by unfair trading practices,” said EU Trade Commissioner Cecilia Malmström.
The European Commission, the legislative arm of the EU, said these measures have distorted the market and favored Chinese industry at the expense of companies and consumers in the EU, in violation of general WTO rules and also of China’s specific commitments from the time of its accession to the WTO. Also, their alleged aim to support the environmentally friendly and sustainable production of raw materials could be achieved more effectively with other measures, without negative impact on trade.
The formal consultations between the EU and China – the first step in the WTO dispute settlement — will be conducted in parallel to a similar procedure initiated by the U.S. In absence of a satisfactory solution within 60 days, the EU may request the WTO to set up a panel to rule on the compatibility of China’s measures with WTO rules.
The EU noted that its request follows a similar one filed by the U.S. on July 13, targeting export duties that China imposes on nine raw materials, ranging from antimony to talc to magnesia and copper, although the two cases are independent. The U.S. charged that China maintains unfair duties, ranging from 5 to 20 percent on exports of antimony, talc, cobalt, copper, graphite, lead, magnesia, tantalum and tin.
China’s total exports of these products are worth around 1.2 billion euro, or $1.32 billion at current exchange, one sixth of which comes into Europe. The EC said a first analysis suggests that removing the export duties imposed by China could allow an additional supply of these raw materials to the EU economy worth around 19 million euro, or $20.9 million, an increase of 9.2 percent.
The U.S. Trade Representative’s office said the duties provide “substantial competitive advantages for Chinese manufacturers [which are not subject to the duties when the raw materials are used in products manufactured in the country] by making them more expensive for U.S. manufacturers that rely on these raw materials to produce their downstream goods.”
The nine raw materials are key inputs that go into several products, including polyester fabric and apparel, cosmetics and products in other critical industrial sectors, such as aerospace, automotive, electronics and chemicals.
Segments of the industry could see a reduction in input costs if the U.S. and EU are successful at the WTO. Antimony is a chemical used in the production of polyethylene terephthalate fibers that are used to make polyester fabric. Another raw material on the list that is part of the WTO case is talc, commonly used in cosmetics products.