WASHINGTON — The U.S. filed a World Trade Organization case against China on Wednesday, targeting export duties it imposes on nine raw materials, ranging from antimony to talc to magnesia and copper that could have implications for the textile, apparel and cosmetics industries.
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.
The duties are levied on exports of the raw materials out of China, which the U.S. Trade Representative’s office said “provides substantial competitive advantages for Chinese manufacturers [who 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 Made in USA products, including polyester fabric and apparel, cosmetics and products in other critical industrial sectors, such as aerospace, automotive, electronics and chemicals.
“In bringing this dispute, we are acting to stop China from imposing a tax that makes certain critical raw materials used in everything from planes to cars to electronics and chemical costs for American manufacturers and less for manufacturers in China,” said U.S. Trade Representative Michael Froman on a press call. “These taxes are passed onto downstream manufacturers outside of China, including manufacturers in the U.S. who need these raw materials to build their products. These taxes are doubly harmful to our workers and manufacturers because they don’t just raise prices in the U.S., they also give Chinese manufacturers a bigger supply of lower-priced raw materials, allowing them make to make lower-priced goods and effectively undercutting competition from our workers and our businesses.”
Vice President Joe Biden, who was poised to make a speech about trade enforcement at the Port of San Diego on Wednesday, said in prepared remarks provided by USTR that it “comes down to fair competition — a notion that is fundamental to who we are as Americans.”
“One of the most important ways we have done that is by enforcing our trade laws more aggressively than any previous administration in history.…Given a level playing field, American businesses and American workers will out-compete anyone. Period,” Biden said.
Segments of the industry could see a reduction in input costs if the U.S. is successful at the WTO.
Antimony is a chemical used in the production of polyethylene terephthalate fibers that are used to make polyester fabric.
One potential scenario that is happening, reflected by the WTO case, is that U.S. makers of polyester fabrics pay a higher price on exports of antimony from China than their Chinese competitors, who are not taxed when using antimony to make polyester in China.
In addition, U.S. apparel brands that make polyester products outside of China, but export antimony from China, would also be paying higher input prices than their Chinese competitors.
“Anytime you are getting rid of costs that are imposed on the supply chain, whether it is export taxes on the raw material like the antimony or whether it is import taxes on finished products like garments, that’s a good thing,” said Stephen Lamar, executive vice president at the American Apparel & Footwear Association.
He said the WTO’s key objective is to set trade disciplines that don’t allow countries to discriminate between local and foreign producers and production. Imposing export taxes that are designed to give a leg up to a country’s own producers, can be deemed noncompliant by the WTO.
“NCTO [the National Council of Textile Organizations] is supportive of any USTR action to eliminate unfair trade practices and level the playing field,” a spokesman said. “We welcome today’s action. We are certainly hopeful today’s action will help make U.S. manufacturers of raw material that go into textile products more competitive.”
A U.S. trade official, who spoke with reporters on the condition of anonymity, said China’s export duties restrict the exports of raw materials and “that has a number of impacts on the U.S. economy that are very negative.”
“First, it causes the inputs to be sold at a higher price in the U.S. market than in China,” he said. “Our producers of downstream products are paying higher prices, higher input costs and therefore, either charging higher prices or making less money on these products, or both.”
Another raw material on the list that is part of the WTO case is talc, commonly used in cosmetics products, a U.S. trade official said.
The U.S. Chamber of Commerce also came out in support of the USTR action against China.
“The U.S. Chamber of Commerce is troubled by China’s continued use of measures that appear designed to make raw materials more expensive for U.S. companies in a number of critical industries, thus putting them at a disadvantage to Chinese manufacturers, including in aviation, electronics and cosmetics,” said Myron Brilliant, executive vice president and head of international affairs at the U.S. Chamber of Commerce.
“As a member of the WTO, China has undertaken commitments to refrain from imposing these export duties, which discriminate against other members. At a time when trade protectionism is on the rise worldwide and trade is declining, all WTO members should renew their commitment to avoid export restraints,” Brilliant added.