Nov. 5 (Bloomberg) -- The U.S. and the European Union asked the World Trade Organization to probe Chinese taxes on exports of raw materials used in the metals and chemical industries, escalating a third joint complaint against China.

The duties discourage the export of commodities including coke, bauxite and manganese that are “critical” for U.S. and European manufacturers, while keeping them cheaper and available in China, the U.S. and the EU said yesterday.

Trade tensions with China have grown after the worst economic crisis since the Great Depression crushed global exports, leading the WTO to forecast a 10 percent drop in goods trade this year. Pascal Lamy, the WTO’s director general, said on Nov. 3 that the threat of protectionism may linger for another two years as countries attempt to protect jobs in domestic industries.

“This is another sign of trade tensions around the world,” said David Cohen, an economist at Action Economics in Singapore. “There’s tension, but it’s yet to get out of hand; it’s a far cry from the 1930s, when protectionism clearly aggravated the collapse in trade.”

Cohen said that China pegging its currency to the dollar was a “more fundamental issue” for major nations to tackle. The central bank has kept the yuan close to 6.83 per dollar since July 2008, helping to shelter exporters from the crisis.

Exaggeration

The raw-material restrictions are designed to “protect the environment and ensure efficient usage of the resources,” China’s Ministry of Commerce said today in an e-mailed response to questions by Bloomberg. China intends to resolve the dispute “according to WTO rules,” it said.

The raw materials at issue, which also include magnesium, fluorspar, silicon metal, silicon carbide, yellow phosphorous and zinc, account for a “very small proportion” of trade between China and the EU and the U.S., the ministry said.

“Foreign demand for these products has declined this year,” it said. “The U.S. and the EU exaggerated the effects of such limits.”

China requires exporters to pay fees and meet minimum export prices and subjects domestic companies and foreign- invested business to different criteria. It also makes the right to export contingent on having done so previously.

WTO rules generally prohibit export restrictions other than taxes, duties and charges, according to the U.S. When China joined the WTO in December 2001, it pledged to scrap “all taxes and charges applied to exports” on all but 84 products. The EU and the U.S. say the raw materials they’re targeting aren’t among those 84 exceptions.

Avoiding Protectionism

Officials from the U.S. and China ended trade talks in Hangzhou last month with a pledge to steer clear of protectionism, underscoring an effort to resolve disputes between the two economies.

U.S. President Barack Obama, who’s visiting China this month, imposed duties on Chinese automobile tires in September, prompting China to complain to the WTO. U.S. tariffs on steel pipes and a Chinese plan to investigate auto imports from the U.S. have added friction.

Disputes between the EU and China include anti-dumping duties imposed on Chinese screws and bolts. The WTO agreed last month to investigate China’s complaint that the measures are discriminatory.

Higher Global Prices

“China’s restrictions on raw materials continue to distort competition and increase global prices, making conditions for our companies even more difficult in this economic climate,” European Trade Commissioner Catherine Ashton said. The nation is either a major supplier or the only source of the raw materials at issue, according to the EU.

Mexico also joined the request by the U.S. and the 27- nation EU for the WTO to set up a panel to determine the legality of the export curbs.

China, the world’s biggest consumer of metals, is the second-biggest trading partner of the EU. The nation passed Canada to become the largest source of U.S. imports in 2007.

Chinese exports dropped more than 15 percent in September after tumbling 23.4 percent in August. Exports from the 16- nation euro region were down 5.8 percent in August from July, the biggest decline in seven months. Exports from the euro area to the U.S., the region’s second-biggest trading partner after the U.K., fell 20 percent in the first seven months of 2009.

The call for WTO judges to rule came more than four months after the U.S. and EU filed a request for consultations, setting off discussions with China. The WTO’s dispute settlement body will consider the request for the establishment of a panel of judges at its Nov. 19 meeting, the U.S. Trade Representative’s office said.

Trade volume between China and the EU grew to more than 326 billion euros ($484 billion) last year. Trade between the U.S. and China expanded to $408 billion last year.

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

Last Updated: November 5, 2009 05:02 EST