Home > Top Story Archive >
October 9, 2008
Top Story
The following story is from the October 9 issue of International
Trade Reporter
Current Reports:
Export Policy
U.S. Slams China on Export Restrictions
On Raw Materials; No Word on Dispute Case
GENEVA--The United States has hit out against China for what it says are increasing restrictions imposed by Beijing on exports of raw materials, adding that some of the more recent measures appear to be in violation of China's World Trade Organization accession commitments.
In a communication circulated to WTO members Oct. 1 as part of the organization's annual transitional review of China, the United States specifically targeted new Chinese restrictions on raw materials used in the production of industrial chemicals. These restrictions have driven up global prices for the inputs, in some cases as much as three times higher than what domestic producers in China pay for the same goods, the United States noted, providing Chinese producers with a "significant" competitive advantage.
"In past transitional reviews...the United States has expressed strong concerns about China's use of export quotas and export duties, particularly on raw materials," the United States said. "In 2008, China continued these policies, and in many cases made them even more restrictive. The United States remains very concerned about all of these actions."
No Comment on Possible WTO Case
The communication made no mention of possible dispute settlement action against China on the issue. The Office of the U.S. Trade Representative is reportedly preparing a possible WTO case against the export restrictions. A spokeswoman said USTR would not comment about any potential cases.
The U.S. complaint follows European Trade Commissioner Peter Mandelson's announcement Sept. 29 that the EU will push China and other important trading partners to lift their export restrictions on raw materials because of the negative impact on European industry (25 ITR 1406, 10/2/08). Mandelson said the EU would not rule out the possibility of bringing a dispute case against China on the issue at the WTO.
China agreed when it joined the WTO in 2001 to undergo an annual review of efforts to comply with its WTO commitments. The review will continue through 2009, with a final review in 2011.
The United States pointed out that on May 20, China raised its export duties on natural phosphates, including natural calcium phosphates, natural aluminum calcium phosphates and phosphatic chalk, and yellow phosphorus from 10-20 percent to 110-120 percent. In addition, China has imposed minimum prices on export sales of natural phosphates and yellow phosphorus.
These actions were taken even though China is the world's leading producer of these inputs, it said.
Appearance of Artificial Pricing
These actions not only discourage exports, they also hurt foreign downstream producers of industrial chemicals by artificially increasing China's export prices for these inputs, which also drives up the world prices, the United States noted.
China's actions "appear to artificially lower China's domestic prices for natural phosphates and yellow phosphorus due to domestic oversupply, enabling China's domestic downstream producers of industrial chemicals to produce lower-priced products from these inputs and thereby creating significant advantages for China's domestic downstream producers of industrial chemicals when competing against their foreign counterparts, the United States said.
"Indeed, since China took these actions, the world price of yellow phosphorus, for example, reportedly has doubled and now totals $9,000 per metric ton (MT), while China's domestic price ranges between $3,000 and $3,500 per MT," Washington added.
Natural phosphates are primarily used in China for the production of fertilizer, while yellow phosphorous is mainly used to produce sodium phosphates, phosphorus trichloride, and other phosphorus chemicals.
The United States said that Section 11.3 of Part I of China's accession protocol prohibits China from imposing export duties on any goods not appearing on a list in Annex 6 of the protocol. "Natural phosphates do not appear on the Annex 6 list," it argued. "Where a good is listed in Annex 6, China committed not to exceed the listed percentage cap. Yellow phosphorus appears on the Annex 6 list, with a cap of 20 percent."
Refined Metal Lead
The United States also reiterated concerns about Chinese export duties on refined metal lead, noting that China decided in 2006 to eliminate a 13 percent value-added tax rebate on exported refined metal lead but then decided the following year to impose a 10 percent export duty on the metal.
"These actions have caused a steep decline in China's exports of refined metal lead and contributed to a sharp rise in world prices," the United States said. "Meanwhile, Chinese domestic prices reportedly have declined because of China's captive refined metal lead production, giving China's downstream producers a significant competitive advantage over foreign downstream producers."
Washington added that refined metal lead does not appear on the Annex 6 list in the accession protocol.
The United States also repeated its complaint raised in previous transitional reviews regarding China's discriminatory tax treatment of fertilizers. China currently exempts all phosphate fertilizers from VAT on sales within China with the sole exception of diammonium phosphate (DAP), which is produced in the United States. The measure discourages use of DAP, for which China committed to permit access under tariff rate quota commitments in its accession protocol, the United States said.
By Daniel Pruzin
Contact the Webmaster at webmaster@bna.com
1801 S. Bell Street, Arlington, VA 22202 - Phone: 1-800-372-1033
Copyright © The Bureau of National Affairs, Inc. All Rights Reserved.
