US Expected to Launch WTO Case Against China

U.S. Trade Representative Ron Kirk is expected to launch a WTO case against China on Tuesday when he holds what his office called a major news conference regarding U.S.-China trade.

Reed Saxon / AP

Kirk's office gave no details in announcing the 9:15 a.m. local time session with reporters. But industry sources said they expected the United States and the European Union would both announce a World Trade Organization case against China over its export restrictions on raw materials.

The expected action by the United States and the EU follows their failure to persuade China to reduce its export tariffs and raise quotas on materials such as zinc, tin, tungsten and yellow phosphorous.

The first step, which industry sources expect to be announced on Tuesday, would be for Brussels and Washington to formally request consultations with Beijing. If these talks fail, the next step would be to request that a WTO panel hear the complaint, a step that can take years.

"If the U.S. and the EU do indeed file a WTO case against China on raw material export restrictions, we welcome this action," said Tom Gibson, president of the American Iron and Steel Institute.

"U.S. and NAFTA steel producers have long believed that this government of China policy is a WTO violation and that it is benefiting Chinese manufacturers artificially while disadvantaging manufacturers everywhere else," he said.

Western governments say resource-hungry China has continued to restrict exports of raw materials used in steel, semiconductors, aircraft and other products despite Beijing's pledge to eliminate taxes and charges on exports when it joined the WTO in 2001.

They say these quotas and taxes hurt European and U.S. companies while giving Chinese companies an unfair advantage. The export curbs drive down China's domestic raw materials costs at the expense of producers elsewhere in the world.

But taking action at the WTO is expected to further damage already brittle trade relations with China.

The materials expected to be covered by the case include yellow phosphorous, antimony, bauxite, coke, fluorspar, indium, magnesium carbonate, molybdenum, rare earths, silicon, talc, tin, tungsten and zinc.

In a move that may have been an attempt to forestall U.S. and European action, Beijing said on Monday it was cutting export taxes on a range of materials, including some used to make steel.

More From CNBC.com

• Wall Street Pulls Back — How Deep Will Losses Go?
• US Jobless Rate Likely to Hit 10% Soon: White House
• Pros Say: Oil, Interest Rates May Stifle Recovery
• More Asia Pacific News

It said that effective from July 1, export taxes for indium and molybdenum would be cut to 5 percent from 15 percent and the 5 percent export tax on sulfuric acid would be scrapped.

Taxes on some steel products and certain tungsten products will also be cut to 5 percent from 10 percent.

Copyright 2009 Reuters. Click for restrictions.