European Union Launches Third Dispute Against Chinese Raw Materials

China is the biggest producer of most of the 20 materials that are essential to the EU's economy.

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On Tuesday, the European Union filed its third lawsuit against China. The EU claims that the country’s restrictions on exports of raw materials allegedly favour Chinese industry, according to Reuters.

The EU’s action against China at the World Trade Organization (WTO) joins another lawsuit made by the US on July 13 regarding restrictions on a number of materials, including:

“We cannot sit on our hands seeing our producers and consumers being hit by unfair trading practices,”EU Trade Commissioner Cecilia Malmström said in a press release. “The past two WTO rulings on Chinese export restrictions have been crystal clear – these measures are against international trade rules. As we do not see China advancing to remove them all, we must take legal action.”

Previously, the US, Japan and the European Union brought a case against China in 2012 claiming that the country’s rare earth export quotas were inconsistent with its obligations as a WTO member. The WTO ruled against China in 2014, and the country scrapped its rare earth export quotas in early 2015. China remains the world’s top rare earth producer by a wide margin.

The EU said that the metals and minerals included in the current lawsuit are among 20 raw materials essential to its economy and that China is the biggest producer of most of those materials.

As the European Commission’s press release states:

China currently imposes a set of export restrictions, including export duties and export quotas that limit access to these products for companies outside China. These measures have distorted the market and favoured Chinese industry at the expense of companies and consumers in the EU, in violation of general WTO rules and also of China’s specific commitments from the time of its accession to the WTO. Also, their alleged aim to support an environmentally friendly and sustainable production of raw materials could be achieved more effectively with other measures, without negative impact on trade.

China’s total annual exports of the listed raw materials average $1.2 billion euros, with one-sixth of that coming from Europe. The release goes on to explain that if China were relieved of its export duties, the EU would gain 9.2 percent, or 19 million euros.

Consultations between the EU and China will be conducted similarly to discussions regarding the claim launched by the US. If a satisfactory agreement is not reached within 60 days, the EU can request a dispute settlement panel through the WTO, according to the release.

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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.

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