WTO says Chinese export restrictions are ‘unjustified’

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WTO Panel Report on export restrictions of raw material in China - .PDF file.

The World Trade Organisation (WTO) ruled this week that China’s export restrictions of certain raw materials on environmental grounds are unjustified, backing a case jointly brought by the EU, US and Mexico.

’This sends a strong signal to refrain from imposing unfair restrictions to trade and takes us one step closer to a level playing field for raw materials. I expect that China will now bring its export regime in line with international rules,’ said EU Trade Commissioner Karel De Gucht.

China applies export restrictions on key raw materials, such as bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorous and zinc. Some of these resources cannot be found outside China.

The export restrictions are mainly quotas (bauxite, coke, fluorspar, silicon carbide and zinc), export duties (bauxite, coke, fluorspar, magnesium, manganese, silicon metal, yellow phosphorus and zinc), a minimum export price system, as well as additional requirements and procedures for exporters.

These have caused concerns for the European chemical, steel and non-ferrous metal industries, as well as their clients who produce beverage cans, CDs, electronics, automotives, ceramics, refrigerators, batteries and medicines.

Export restrictions can create serious disadvantages for foreign producers by artificially increasing China’s export prices and driving up world prices. At the same time, such restrictions artificially lower China’s domestic prices for the raw materials due to significant increases in domestic supply.

This gives China’s domestic downstream industry significant competitive advantages and puts pressure on foreign producers to move their operations and technologies to China.