China accused of hoarding minerals

The European Union and the US say high exports tariffs on minerals leaving China are greatly distorting the industry, and are threatening to take their complaint to the World Trade Organisation later this month if the problem is not rectified.

Officials say the high tariffs prevent minerals such as zinc, tin, tungsten and silicon from leaving China, enabling manufacturers within the country to purchase the raw materials at bellow market prices, reports the Financial Times.

The European Commission is set to discuss the issue with member states on Friday (12 June) before taking up the matter with China later this month in a bid to avoid the need for a WTO action.

China's handling of its mineral resources has been a long-standing source of trade tension with the West.

Particular irritation stems from a 95 percent duty on yellow phosphorous – an important component in numerous industrial chemicals – that the EU says greatly exceeds levels agreed by China when it joined the WTO in 2001.

Likewise, the use of quotas to limit the amount of various minerals leaving China contravenes WTO rules say European diplomats, reports the Wall Street Journal.

They argue that the use of both export tariffs and quotas artificially lowers the input costs of raw materials for Chinese producers, placing European and US manufacturers at a distinct disadvantage.

The EU has already taken action in this area in April, placing temporary duties on Chinese aluminium foil and seamless steel pipes that they say benefited from artificially cheap raw materials.

In previous boom years, other governments around the world including Argentina, India and Russia have also used exports tariffs as a way of keeping raw materials for domestic use.

Ongoing trade tensions

This latest dispute adds to ongoing trade tensions between the EU and China, despite extensive political and diplomatic efforts in recent months to smooth over problems.

China and the EU held a summit in Prague last month and are likely to hold another in December. Likewise, various high-level trade talks have been held between the two sides this year.

Despite the overtures however, the EU has used an increasing array of anti-dumping measures against Chinese products and has failed to recognise China as a market economy – a status that would limit the EU's capacity to use antidumping measures.

China complains that such measures amount to a form of protectionism.