W.T.O. Says Chinese Restrictions on Raw Materials Break Rules

W.T.O. Says Chinese Restrictions on Raw Materials Break Rules
By STEPHEN CASTLE
The New York Times, July 5, 2011

BRUSSELS — The World Trade Organization said Tuesday that Beijing violated global rules by restricting exports of nine raw materials used in high-technology products, in a case that has stoked tension between China and its Western trading partners.

The ruling is in response to a complaint lodged by the United States, the European Union and Mexico in 2009, which underscored the growing concern among Western governments about Chinese trading policies. It also strengthens European arguments against Chinese restrictions on the metals.

The decision Tuesday concluded that Chinese quotas, export duties and license requirements put in place a discriminatory regime for the export of industrial raw materials, including coke, zinc, magnesium, bauxite and silicon metal.

“This is a clear verdict for open trade and fair access to raw material,” said Karel De Gucht, the European trade commissioner. “It sends a strong signal to refrain from imposing unfair restrictions to trade and takes us one step closer to a level playing field for raw materials.

“I expect that China will now bring its export regime in line with international rules,” he continued. “Furthermore, in the light of this result, China should ensure free and fair access to rare earth supplies.”

In its decision, a W.T.O panel rejected China’s argument that its restrictions were motivated by a desire to protect the environment and prevent a critical shortage of the materials.

Europeans had challenged China’s environmental protection argument by pointing out that the consumption of the raw materials was not being controlled domestically.

China must now either appeal the ruling or comply with it by removing the restrictions. If it fails to do either, the United States, the Union and Mexico could eventually be allowed to respond with equivalent trade sanctions, according to W.T.O. rules.

The nine raw materials covered by the ruling are used in medicines, compact discs, electronics, the automotive industry, ceramics, refrigerators and batteries, among other products.

European officials said the export restrictions increased the global price for the raw materials, giving Chinese companies a clear commercial advantage.

They also made it harder for non-Chinese companies to procure the raw materials by making them less readily available on the global market.

A version of this article appeared in print on July 6, 2011, in The International Herald Tribune with the headline: W.T.O. Says Chinese Restrictions on Raw Materials Break Rules.