US scores major trade case victory over China

The United States, European Union and Mexico scored a major victory over China at the World Trade Organization on Tuesday as the WTO found China had illegally constrained its exports of raw materials.

The policies had the effect of reducing prices for Chinese downstream products and increasing costs for U.S. manufacturers.

When China joined the WTO it had agreed to stop restricting the export of key materials, including those used in steel and chemical manufacturing. The WTO found China had broken its commitments and failed to provide justification using existing exemptions in the WTO texts.

“China’s extensive use of export restraints for protectionist economic gain is deeply troubling. China’s policies provide substantial competitive advantages for downstream Chinese industries at the expense of non-Chinese users of these materials,” U.S. Trade Representative Ron Kirk noted in a statement.

China had sought to justify the restraints as conserving natural resources, but the WTO found that China is only “heading in the right direction” in adopting rules that would also constrain domestic consumption of the materials. China also failed to show the export duties and restrictions were being used to reduce environmental pollution.

China can appeal the findings, and if a further WTO compliance panel at some point finds China has not complied with the rule, the U.S. could impose trade sanctions on Chinese imports in retaliation.

Rep. Mike Michaud (D-Me.), a leader of trade skeptics in the House, applauded the ruling.

“The WTO made the right call. It’s clear that China restricted exports of raw materials for no other reason than to boost their manufacturers to the detriment of those in all other countries,” said Michaud. “This ruling illustrates why it’s so important for the U.S. and others to continue to bring these cases to the WTO."

House Minority Whip Steny Hoyer (D-Md.) also praised the ruling.

“American manufacturers, businesses and workers can compete successfully in today’s global market as long as there is a fair and level playing field," Hoyer said in a statement. "Actions like the one today will help ensure that everyone plays by the rules, and that American workers will make it in America."

Updated at 3:12 p.m.

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