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26th Aug 2019

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EU takes China to WTO over raw materials

The European Union and the United States launched a joint action against China at the World Trade Organisation on Tuesday (23 June) over the Asian giant's use of export restrictions on raw materials.

"The Chinese restrictions on raw materials distort competition and increase global prices, making things even more difficult for our companies in this economic downturn," said European trade commissioner Catherine Ashton.

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  • The EU says Chinese companies, including metal producers, gain an unfair advantage from China's export restrictions (Photo: Notat)

"I hope that we can find an amicable solution to this issue through the consultation process," she added.

The EU argues that China's export restrictions, which include the use of quotas, export duties and minimum export prices, result in Chinese companies gaining access to key raw materials below market prices.

The materials concerned include yellow phosphorous, bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide and zinc, some of which are only readily available in China.

Chinese companies producing and using certain chemicals and metals are the main beneficiaries of the export restrictions, says the EU, breaching both general WTO rules and also specific commitments in China's WTO accession protocol.

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.

Buy China provision

The EU is also currently investigating the provision of a ‘Buy China' policy linked to the country's €420 billion stimulus programme.

Under the provision, stimulus funded projects must seek permission from Beijing before purchasing foreign goods or services.

"Only Chinese products and services may be used for government procurement, except when certain products or services are not available within the country or could not bought on reasonable commercial terms," reads the Chinese policy.

The EU successfully forced a limited backdown by the US earlier this year over a ‘Buy America' clause related to its stimulus package that would have restricted foreign steel imports.

However, an EU official working on the China investigation said the commission was hesitant about putting the Chinese provision into "the same pot" as the ‘Buy America' clause.

China has not signed up to the WTO's government procurement agreement, something that limits the EU's list of possible responses.

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