WTO Questions China’s Export Barriers

By | June 1, 2010

China’s curbs on exports of some raw materials to conserve resources may not meet the stated goals, while giving Chinese manufacturers an unfair advantage, the World Trade Organization said on Monday.

The remarks, in a report prepared for China’s two-yearly trade policy review, constituted a rare comment by the WTO’s secretariat on a current dispute between members.

By cutting off exports of some raw materials, China makes them more expensive for foreign manufacturers who use them while making them cheaper for its own processing industry, which is able to sell finished goods abroad more cheaply than foreign competitors can.

China’s restrictions on raw materials sales have been challenged by the United States, European Union and Mexico, and the WTO set up a panel in December to rule on the complaints.

The WTO noted that China has continued to open its markets since joining the global trade body in 2001, and its average tariff is now 9.5 percent against 9.7 percent in 2007. But it said export barriers have not fallen as fast as import barriers.

China uses restrictions such as prohibitions, licensing, quotas, taxes and partial tax rebates to manage certain exports in order to conserve resources and energy, it said.

The report questioned whether this approach was economically effective, and noted that such restraints tend to reduce export volumes of the targeted products, diverting supplies to the domestic market and depressing their domestic prices. “Export restraints… may implicitly assist domestic downstream processing of the products concerned,” it said.

WTO officials are normally reluctant to comment on issues that are subject to litigation for fear of influencing the outcome, and the report steered a discreet path around other disputes involving China.

It refrained from any recommendation on China’s currency, whose level concerns the United States and some other trading partners. It noted that when the International Monetary Fund had last examined it, some IMF directors had agreed that the yuan was substantially undervalued, while the central bank wants to keep the rate basically stable.

The report was prepared on April 26 but released only on Monday for the start of the three-day review of trade policies at the world’s biggest exporter and second-biggest importer.

China was making greater use of trade actions such as duties on unfairly priced imports, while itself remaining the most frequent target of such anti-dumping measures, it said.

Since 2008 China has been involved in four disputes as a complainant and 11 as a defendant, it said.

The United States said it disagreed with the WTO report’s statement that China was continuing to open its economy, saying that progress towards liberalization had slowed since 2006.

“In the United States’ view, China has become much more focused on developing industrial policy initiatives aimed at helping Chinese enterprises move up the value chain in key industries, and China has demonstrated a highly selective interest in continuing to open its market more fully and fairly to foreign participation,” U.S. ambassador to the WTO Michael Punke said in a statement at the review.

Besides export restrictions, Punke cited special Chinese standards, “Buy China” procurement policies, a postal law excluding foreign suppliers from much of express delivery services, restrictions on supplying telecoms or entering the telecoms market and limits on foreign investment.

The United States wants China to do more to protect intellectual property rights, despite recent efforts, and services including banking, insurance, telecoms, electronic payments, express delivery and law are still subject to high levels of state control and lack of competition, he said.

(Editing by David Stamp)

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