Copper trade remains contentious

Recycling Today, Sept, 2004

Despite a recent U.S. Department of Commerce ruling rejecting a request for the its intervention to monitor and restrict U.S. exports of copper scrap, a group of red metals production and fabrication companies continues to clamor for government attention.

The Copper and Brass Fabricators Council Inc.(CBFC) and the Non-Ferrous Founders Society (NSF) have jointly authored a white paper titled "Smuggling, Bribes, and Subsidies: The Copper Industry in China."

Joseph L. Mayer, president and general counsel of the CBFC, says, "Chinese government ownership and control, preferential tax treatment, customs fraud, disregard for the global copper market and currency manipulation are a lethal combination and have unfairly increased the cost of doing business for those of us who practice integrity in such matters."

The report groups the Chinese policies that encourage the development of its copper industry to the detriment of the world marketplace into five points:

* Ownership and control of China's copper industry by provincial and city governments has protected the industry from market forces and bestowed direct and indirect subsidies.

* Preferential refunds of value-added taxes paid on imported raw materials have acted to lower costs to the Chinese industry.

* Various forms of misclassification and customs fraud are understood to betaking place at Chinese ports of entry, allowing copper producers to obtain raw materials at artificially reduced costs.

* The Shanghai Metal Exchange has been maintained as an exclusive entity handling future agreements and trading of nonferrous metals within China and appears to act as a means of encouraging Chinese involvement in value-added copper processing and production, independent of the dictates of the global copper market.

* Pegging Chinese currency to an artificially low rate of exchange with the U.S. dollar has increased Chinese exports of finished products produced from copper and copper alloys and has allowed China to build up massive reserves of U.S. dollars, which are then used to pay top dollar for raw materials, notably copper scrap, in the United States.

The Institute of Scrap Recycling Industries Inc. (ISRI), representing many of the exporters, has urged the Commerce Department to resist placing restrictions on scrap exports. "Export controls are bad policy, bad for the economy and are counter to overall U.S. trade policy," ISRI President Robin Wiener says.

"We should not fight alleged unfair trade practices abroad with our own unfair trade practice here at home," Wiener remarks.