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Source: www.asiaecon.org |


Both the U.S and European Union have reportedly criticized China for "unfairly limiting its raw materials exports" and instead give its domestic industry access to cheaper materials. China denies such claims and affirms that it is following its World Trade Organization obligations and protecting the environment and natural resources. Sources in Geneva, where the dispute is going to be settled, admit that "In terms of trade disputes, it doesn’t get bigger than this."


Bauxite, magnesium and coke (which are used to make steel) are some of the materials that are causing the two countries to become concerned. Ron Kirk, U.S Trade Representative holds that China is “unfairly restricting exports of raw materials,” and is therefore harming American steel, aluminum and chemicals that American and European manufacturers rely heavily on to make their products. The U.S and E.U criticisms have resulted in a 60 day consultation period, where the dispute will be resolved and where Kirk will attempt to “enforce the rights of American manufacturers, farmers, ranchers service providers and workers using the rules-based global trading system.” If the U.S and E.U would win the case, they would be permitted by the WTO to impose economic sanctions on China.

Europe’s trade commissioner, Baroness Ashton, said, “The Chinese restrictions on raw materials distort competition and increase global prices, making things even more difficult for our companies in this economic downturn.”

Both countries argue that China places restrictions such as minimum export prices and tariffs of up to 70% on a variety of raw materials it supplies. For example, China produced about 336m tones of coke in 2008 but only exported 12m tones. This type of control on the quantity of raw materials exported gives China many advantages, by keeping domestic production prices low, but it limits competition from other countries, which is against the WTO agreements. The U.S and E.U want China to reduce its export tariffs, and raise quotas on key materials, such as bauxite, coke, magnesium zinc and yellow phosphorus, among others.

Some industry experts hold that China is right while the U.S and E.U are being “unreasonable”. Zhou Shijian, from the WTO Studies says, “It is groundless to ask China to reduce tariffs or raise quotas,” since the WTO rules only specifically say that countries can’t restrict imports. He also defends China by stating that “nobody can ask others to sell natural resources at low prices.” Zhao Jinping, an expert with the State Council also said, “Export restrictions on these materials are in accordance with China’s aim to establish an environmentally friendly and energy-saving society.”

It is obvious that each of the three countries is trying to protect their own economies, amid the global recession. China’s “Buy Chinese” clause, supported by the fiscal stimulus program, works against the United States’ and the European Union’s economic plans. The World Bank estimated that global trade volume will decrease 9.7 percent this year alone. The countries must negotiate to work for the most economically efficient solution for all countries to curtail the global downturn and maintain important and beneficial trade relationships.

Source: www.asiaecon.org |

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