The United States and European Union on Tuesday began a case against China at the World Trade Organization over its export restrictions on industrial raw materials, saying Beijing was trying to tilt the playing field in favor of its own industries.
The action followed failure to persuade resource-hungry China to reduce its export tariffs and raise quotas on a number of key materials such as coke, zinc and yellow phosphorus.
The materials are used in steel, microchips, planes and other products, and the trade flows affected are worth billions of dollars, U.S. officials said.
After more than two years of urging China to lift these unfair restrictions, with no result, we are filing at the WTO today, U.S. Trade Representative Ron Kirk told a news conference in Washington.
We are most troubled that this appears to be a conscious policy to create unfair preferences for Chinese industries that use the materials, he said.
The United States and the European Commission -- which oversees trade for the 27-nation EU bloc -- are formally seeking consultations with Beijing at the global trade watchdog. If these talks fail, after 60 days the next step would be to request a WTO panel to hear the complaint.
It is very much hoped that we will not have to proceed to the next stage, Kirk said.
In Brussels, EU Trade Commissioner Catherine Ashton said in a statement, The Chinese restrictions on raw materials distort competition and increase global prices, making things even more difficult for our companies in this economic downturn.
I hope that we can find an amicable solution to this issue through the consultation process, she said.
CHINA LIMITING EXPORTS
The EU and the United States say China continues to restrict exports of raw materials despite its pledge to eliminate export taxes and charges when it joined the WTO in 2001.
This seriously disadvantages foreign downstream producers of goods, such as aluminum producers and steelworkers, since the export restraints limit their access to raw materials and raise world market prices for the materials while lowering the prices that domestic Chinese producers have to pay, U.S. officials said.
U.S. officials said the nine materials covered by their case were bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc.
In Ottawa, Canadian officials indicated they haven't ruled out joining the case. For the moment, we are closely monitoring developments in this file, said Melisa Leclerc, spokeswoman for Canadian Trade Minister Stockwell Day.
Taking action at the WTO is expected to further damage already brittle trade relations with China. U.S.-China tensions have been exacerbated by the growth in the U.S. trade deficit. This is the first case brought by President Barack Obama's administration against China at the WTO.
Trade disputes between Brussels and Beijing are on the rise since the EU's trade deficit with China has ballooned. Brussels has imposed a number of anti-dumping tariffs on imports of Chinese goods ranging from shoes to steel products.
In a move that may have been an attempt to forestall U.S. and European action, Beijing had said on Monday it was cutting export taxes on a range of materials.
But the steps China took had no impact on eight of the nine materials in the U.S. complaint, with phosphorus being the exception, a U.S. trade official said, speaking on condition of anonymity. We are still studying what China did, she said.
The Alliance for American Manufacturing praised the U.S.-EU move, saying it could be the first step in a new and promising era of trade enforcement.
(Additional reporting by Louise Egan in Ottawa)
(Editing by David Storey)