EU, US Team Up Against China Export Quotas on Manufacturing Metals

by , Jeff Yoders on JULY 20, 2016

The U.S. and the European Union filed a jointWorld Trade Organization challenge against China on July 19 over its use of duties and export quotas to control shipments of metals such as tin, tantalum, lead, copper, chromium, cobalt and others.

The E.U./U.S. effort comes after the U.S. government’s original request for consultations filed on July 13. It also comes after the European Union failed to resolve a dispute with China over its use of duties and export quotas during bilateral meetings with China last week.

The new request adds challenges to export duties on chromium to the original list of antimony, cobalt, copper, graphite, indium, lead, magnesia, talcum, tantalum and tin. The new request also includes China’s export quotas imposed on antimony, indium, magnesia, talc and tin.

Trade Rep Speaks Out

During last week’s announcement, U.S. Trade Representative officials said export duties on the raw materials ranged from 5 to 20% and enabled Chinese companies to produce lower-priced goods than their U.S. competitors. China also used the lower cost of raw materials to encourage U.S. companies to move production to China, the office of the U.S. Trade Representative charged.

“Today’s action again makes clear that we will not hesitate to challenge export policies that harm U.S. manufacturers by restricting their access for key inputs into products made here in America,” U.S. Trade Representative Michael Froman said.‎ “The restraints we challenged last week, along with the ones we have included today, are part and parcel of the same troubling policy — one that provides advantages for China in important manufacturing sectors at the expense of the rest of the world.”

The Trade Representative specifically says China’s export duties appear to be inconsistent with paragraph 11.3 of part 1 of China’s WTO accession protocol, which says “China shall eliminate all taxes and charges applied to exports unless specifically provided for in Annex 6 of this Protocol….”

The office also said the tariff lines covering the metals and other raw materials detailed in the request for consultation are not included in the annex of exceptions.

Previous WTO cases where the U.S. challenged Chinese quotas involved rare earths, tungsten and molybdenum (filed in 2012) and bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorous and zinc (filed in 2009). The final determination in both cases included a ruling that China’s export duties were inconsistent with its accession protocol.

China removed its rare earth export quotas entirely after losing the 2009 case.

GATT Violation?

The U.S. also said China’s export quotas appear to be inconsistent with Article XI:1 of the WTO’s General Agreement on Tariffs and Trade.

Article XI:1 of he GATT states: “No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.”