June 24 (Bloomberg) -- China’s government said it will contest complaints to the World Trade Organization from the European Union and the U.S. that the nation unfairly limits exports of raw materials such as magnesium, coke and zinc.

The policy aims to protect the environment and natural resources and “is in accordance with WTO rules,” the Ministry of Commerce said in a faxed statement today.

The EU and U.S., which yesterday lodged their third joint complaint against China, allege that the nation’s export taxes keep material costs lower for domestic steel and manufacturing companies. Today, China called for a WTO probe of U.S. restrictions on poultry imports and the trade body’s former chief, Mike Moore, warned that the world is in “dangerous waters” as protectionism increases.

“It’s a gradual slide towards greater trade protectionism,” said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong.

The raw-materials case is the first WTO complaint brought by the Obama administration, which came to office vowing to take a harder line against trade barriers, especially in China.

“China’s policies on these raw materials put a giant thumb on the scale in favor of Chinese producers,” U.S. Trade Representative Ron Kirktold reporters in Washington yesterday. “It’s our job to make sure we remove that thumb.”

‘Buy American’

China’s commerce ministry said today that the government had asked the WTO to set up a panel of experts to investigate U.S. poultry restrictions. Trade tensions between the two countries span product safety and calls for a stronger yuan.

Chinese officials have complained about Buy American rules imposed on government spending by Congress, and moves to restrict U.S. imports of Chinese tires and steel pipes. China reiterated this month its own rules favoring local suppliers for government projects.

The raw-materials complaint, filed in Geneva, accuses China of using taxes or quotas to discourage the export of bauxite, coke, magnesium, silicon metal, yellow phosphorous and zinc. China scrapped or reduced yesterday export taxes on some fertilizer chemicals, including yellow phosphorous.

“Many of the materials cited, such as bauxite, coke and zinc are very important resources for China and the country’s manufacturing industry,” said Judy Zhu, a commodities analyst at Standard Chartered Plc in Shanghai. “China imports bauxite and coke to meet demand and uses export duties to keep these resources at home.”

Cars, Baseball Bats

China, the world’s fastest-growing major economy and biggest consumer of metals, uses coke to make steel and zinc to galvanize the metal. It refines bauxite into alumina, which is then smelted into aluminum.

The nation is either a major supplier or the only source of the materials at issue, according to the EU. They’re used in products from consumer electronics to cars, plumbing fixtures to baseball bats, according to a U.S. statement on the dispute.

The “good news” in the dispute is that WTO mechanisms are taking the place of unilateral action, Moore said. “It’s disappointing that they have to, but it is the rule of law that is operating, not the rule of the jungle.”

He also expressed concern at nations speaking out against protectionism and then doing “exactly the opposite.”

Kirk and EU Trade Commissioner Catherine Ashton said they hope for a resolution of the raw-materials complaints during 60 days of mandatory WTO consultations. China will “properly resolve” the dispute using WTO procedures, the Chinese commerce ministry said today.

China is the biggest source of U.S. imports, and the EU’s second-largest trading partner.

Australia is investigating the alleged dumping of aluminum extrusion products by China, the Australian Customs and Border Protection Service said in a public notice published today in The Australian newspaper.

To contact the Bloomberg News staff on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net; Mark Drajem in Washington at mdrajem@bloomberg.net.

Last Updated: June 24, 2009 05:44 EDT

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