The European Union has requested the establishment of a WTO panel on Chinese export restrictions on a number of key raw materials, which it considers are in clear breach of international trade rules. The EU has raised the issue with China repeatedly, including through formal WTO consultations, but without success. The EU has now turned to the WTO dispute settlement process to ensure China’s compliance with its international obligations. The United States and Mexico have also today requested a panel on the same issue.
EU Trade Commissioner Catherine Ashton said: "China's restrictions on raw materials continue to distort competition and increase global prices, making conditions for our companies even more difficult in this economic climate. I regret that the formal consultation process and significant EU engagement on this issue has not led to an amicable solution which would have been our preferred course of action."
European industries have raised concerns for a number of years on export restrictions – quotas, export duties and minimum export prices – which China applies on key raw materials, such as yellow phosphorous, bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide and zinc. Some of these resources cannot be found elsewhere.
Restrictions on raw materials give Chinese companies an unfair advantage, as downstream industries in China have access to cheaper materials than their competitors outside China. The chemical, steel and non-ferrous metal industries, as well as their downstream clients, are the main sectors concerned.
The EU considers that these restrictions are in violation not only of general WTO rules, but also of specific commitments that China signed up to as part of the WTO Accession Protocol, which set out either prohibitions against the use of export duties or strict caps on a limited number of products, as well as disciplining the use of export licensing and binding minimum export prices.
The panel requested today focuses on a first batch of measures and products. However, the EU's concerns are not limited to these measures and further legal action cannot be ruled out if these concerns are not effectively addressed.
The EU requested formal WTO consultations on 23 June 2009 but these discussions did not lead to an amicable solution.
EU-China trade has increased dramatically in recent years and now totals over EUR 300 billion. China is now the EU's 2nd trading partner behind the USA and the biggest source of EU imports. China's non-tariff trade barriers mean that EU companies are denied business opportunities in China worth at least EUR 20 billion a year.