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Number: 423
Name: EUCOPPER
Name: EU Copper Export Restriction
A. Identification:
1. The Issue
In 1971, the European Community enacted an export restriction on copper scrap. Copper is not a naturally occurring resource in the European Community. This restriction was imposed in order to protect their copper and brass manufacturers from having to pay higher prices for copper scrap. These manufacturers used copper scrap as a raw material in their manufacturing processes. The Europeans claimed at the time that there was a copper scrap shortage within the European Community. In 1988, the United States government threatened to take action against the community if this restriction continued. At the hint of retaliation, the European Community finally offered to re-examine the situation of copper scrap restrictions.2. Description
Nations in Europe have determined that in order to be more competitive, they must come together as a single market in order to pool their resources. This means unification of many trading policies within Europe. One common policy that Europe did enact in order to help their industry is the export restraint on copper scrap. This regulation was enacted in order to protect the copper and brass manufacturers in Europe. The copper scrap export restraint kept the price of this raw material low. In order to reduce the price of copper and copper-alloy scrap to their brass mills, the European Community imposed export quotas on these raw materials. These quotas were set by the European Community in 1971 during a copper and copper-alloy scrap shortage. The United Kingdom has an added restriction to this export quota. With the help of these export quotas and other restrictions, brass mills within the European Community were able to purchase scrap at relatively lower prices. The export restraint keeps the copper and copper-alloy scrap within Europe because corporations are not able to export these materials. This causes an over abundance of copper scrap within the European Community. In order to sell these raw materials, companies must greatly reduce their prices. These restrictions have allowed the European Community to manipulate the world markets to their advantage. (1) Brass mills in the United States must pay more for these raw materials thus increasing the cost of their finished products. Because of the lower cost of their finished products, European companies are able to dump the products into the US market, causing a decrease in sales of US companies. The Council of American Copper and Brass Fabricators allege that this is a scheme by Europe to take over the American market. (2) These export restrictions have cost the US brass mill industry over 150 million dollars annually in additional raw material costs. US trade officials consider this increased cost to be due to unfair trade practices of the European Community. Because of these greatly increased costs and loss of sales, the Copper and Brass Fabrication Council, Inc. called on the United States government to stop these unfair trade practices. The Copper and Brass Fabrication Council accounts for more than 80% of all brass mill products in the United States. In the late fall of 1988, this council filed for relief from the European Union's unfair trade practices under Section 301 of the Trade Act of 1974. At the time of filing Brazil was also targetted. This action called for the European Community to remove these restrictions. In response to the petition filed by the Copper and Brass Fabricators Council, the US government began to investigate these trade restrictions in December of 1988. This investigation was focused on the question of whether the European Community's quotas were consistent with the policies of the General Agreement on Tariffs and Trade (GATT). The GATT specifically prohibits most export quotas. Under US trade law, the US government can take any "appropriate and feasible action in response to unfair trade practices." (3) The question for the United States was whether the export quota was an unfair trade practice. The United States threatened to launch an investigation to determine if Europe really required this export quota. This threat dredged up other problems between Europe and the United States in the area of trade. The United States and Europe have had disputes over many trade issues including farm subsidies, meat hormones, and various import and export restraints. The United States planned to remove the export quotas through negotiation and, in failing that, then go to the GATT to make the final determination as to the legality of the quota. The United States also considered taking retaliatory measures against Europe. These measures could include a 100% duty on fabricated copper and brass products. Although in some cases the US uses voluntary export restraints, (i.e., Japanese auto makers), in the case of copper and copper scrap, this quota is said to restrict US manufacturers' access to raw materials and feels the need for some type of action. At the beginning of the US-launched investigation, the European officials defended their policies. These officials questioned some of the US's information concerning the allegation and stated that the EEC policy was necessary. The European officials insisted that Europe would experience a shortage of the raw material if these quotas were removed. Europe has no domestic copper resources and must rely on scrap for manufacturing inputs. A European business representative stated that allegations of injury to US manufacturers was unfounded because open market scrap accounted for only 20% of the intake for all semi-fabricated products. European representatives also stated that the US government's estimates of copper scrap in Europe were too low. They called for accurate comparisons of the same grades of copper scrap. They further believed that their export quotas were permitted under GATT and that quotas have had little or no effect because the quota was only filled in one of the nineteen years it was in existence. Another business spokesman pointed out that Japan and other Asian Newly Industrialized Countries have import duties on refined copper products but none on raw materials. This induces unfair high prices in these nations, causing high demand for these raw materials. This could in turn cause a shortage in Europe of these copper raw materials. The position of the US stresses that these quotas go against GATT and disrupt the free flow of trade. These quotas also deflect copper scrap demand from the European Community to the United States. This artificially inflates the prices of the raw materials in the US, hurting the copper and brass manufacturers who must use these raw materials in the US. A business representative from the US stated that his company must compete with the high volume of finished European goods in the US market. This had a severe impact on his sales. In the summer of 1989, the European Economic Community set up a special disputes panel to investigate and respond to the complaints of the US. The European officials hoped that this panel would clarify the issues involved in the copper scrap market. European officials also stated a willingness to discuss a multilateral attempt to liberalize copper scrap world trade. By the end of 1989, the European Economic Community decided not to renew its copper alloy scrap export quotas. The reason for this change in policy came about after the US threatened to investigate the quotas further and/or act in a retaliatory fashion. The European Community stated that after studying market trends; they determined that there was no need for these export quotas. The quotas were put in place to protect a short supply of copper in the EC. This situation no longer existed. After this decision by the European Community, the dispute over copper scrap export quotas was put to rest. The Copper and Brass Fabricators Council made a point to state that now the European and US brass mills could compete on an even field. The US presented the correct facts and eventually persevered. The export quotas were put in place by the European Community in 1971 in order to protect European manufacturers. Europe does not possess copper in the raw material form. World-wide copper is considered to be a valuable resource. As Europe protected its market, copper shortages occurred all over the world and prices increased. Providers of copper as a raw material over-mined their land in order to meet demand. In some cases this caused environmental problems. Copper is an essential trace element needed for growth of many plants, animals, and human beings. Increased quantities of copper are not known to have any significant adverse affects on the lives of these organisms. Excess copper is not burned into the atmosphere or dumped into bodies of water. Most excess copper is recycled as copper or copper alloy scrap. Manufacturers can use this raw material in production. The use of this excess copper as a raw material is beneficial to the environment.3. Related Cases:
Bolivia Gold Mining Brazilian Gold Mines Yellowstone Mine Papua Mining Ghana Gold Mining Peru Mining Zambia Copper Trade Roman Bronze Trade Copper/Chile Summit Mine4. Draft Author:
Jennifer L. Dopp March 3, 1997B. LEGAL Clusters
5. Discourse and Status: AGREEMENT AND COMPLETE
In 1989, after the European Community decided not to renew its export quotas on copper and copper-alloy scrap, the issue between the United States and the European Community was solved. The point of the Copper and Brass Fabricators Council's complaint was that US manufacturers had to pay unfair high prices for copper scrap a copper alloy scrap. The European Community enacted export quotas on these materials in 1971 to protect Europe from a shortage of copper scrap. No formal charges were filed by the US on this issue. Due to the complaint filed by the Copper and Brass Fabricators Council, the United States government vowed to investigate the export quota issue and possibly use retaliatory measures against the European Union. The United States did not have the time to launch a formal investigation into the issue. Only the threat of an investigation and retaliatory measures was required for Europe to remove the export quotas.6. Forum and Scope: MULTINATIONAL AND BILATERAL
7. Decision Breadth: Sixteen Nations of the European Community
8. Legal Standing: AGREEMENT
C. GEOGRAPHIC Clusters
9. Geographic Location
a. Geographic Domain: Europe b. Geographic Site: Western Europe c. Geographic Impact: Germany Germany has the largest business presence concerning the copper scrap export restraints. Germany has many copper and brass manufacturers.10. Subnational Factors: YES
The copper export quota had significant impacts on areas where copper is mined. In these areas, during the time that the restraint was in place, mining was increased. In some cases, this caused significant environmental problems for the areas. Although miners were making significant profits, land erosion due to mining brought problems to their neighborhoods. This erosion caused damage to farmlands and grazing areas.11. Type of Habitat: Temperate
D. TRADE Filters
12. Type of Measure: QUOTA
13. Direct vs. Indirect Impacts: INDirect
14. Relation of Measure to Environmental Impact:
a. Directly Related: NO b. Indirectly Related: YES, MINING, RECYCLING c. Not related: NO d. Process Related: YES, Land Pollution15. TRADE PRODUCT IDENTIFICATION: COPPER
16. ECONOMIC DATA
This export quota had economic implications for the global copper market, including the United States and Europe. Europe set up this quota in 1971 in order to help their copper and brass fabricators who must use copper and copper-alloy scrap as a raw material. At the initiation of the quota, Europe was experiencing a shortage in copper and copper scrap. The quota was put in place so that copper and brass fabricators in Europe would not have to pay large sums of money for raw material. Raw material costs were depressed for these manufacturers so that they could keep their prices down. During the nineteen years of this quota, European brass and copper product manufacturers were able to establish a significant presence in the international market. While European manufacturers were reaping the benefits of this quota, US manufacturers were losing money and market share. In 1989, the United States manufacturers brought this quota to the attention of the US government. They claimed that this trade restriction has cost them over 150 million dollars annually, since the advent of the restriction due to increased costs for copper and copper-alloy scrap which are important raw materials in their products. This caused an increase in the price of their goods and a decrease in sales. European manufacturers were able to "dump" their products into the market of the US. The council of brass and copper manufacturers also alleged that Europe no longer had a shortage of these raw materials and therefore had no need for the restriction.17. Impact of Measure on Competitiveness: HIGH
This export quota had a significant impact on both European and U.S. producers of copper and brass products. Europe has to import copper in a raw material form for use in manufacturing. The European Community and its companies must pay for the shipping and any taxes involved in this transaction. For this reason, retention of copper scrap is important for Europe. The fact that Europe did not have copper as a natural resource and that a copper scrap shortage in Europe may exist caused European Community officials to enact this quota. Copper scrap is used as a recyclable material. This quota has allowed European manufacturers to have ready and inexpensive access to copper scrap.18. Industry Sector: METAL
19. Exporter and Importer: MANY AND EUROPE
E. Environmental Clusters
20. Environmental Problem Type: POLL (Land Pollution)
Copper can be found in many different areas around the world. The United States does have some mines; however, the demand for copper in the United States is very high. The fact that manufacturers can use copper scrap as an input for their goods, makes it recyclable. Once Europe enacted the export quota, the amount of copper scrap on the international market decreased significantly. Due to this decrease, mining areas had to be expanded to provide copper for the international market. This caused land erosion and loss of plant and animal species. Copper scrap could also have been in overabundance in Europe, causing land pollution in nations without recycling or extensive exporting policies. Excess copper is not generally allowed to escape into the air in fumes or to be dumped into bodies of water. In most cases, copper is recycled. Europe was keeping copper scrap away from those who could use it in a recyclable form.21. Name, Type, and Diversity of Species
22. Resource Impact and Effect: MEDIUM and PRODUCT
Copper is a finite resource. Miners continue to extract this mineral from the land. Recycling copper, copper scrap, and copper- alloy scrap has slowed down the impact of manufacturing on this resource. Manufacturers will continue to need copper and copper- alloy scrap in order to produce their goods. These companies must continue to recycle copper and copper scrap in order for this material to last. Any significant loss in this resource will cause a decrease in products and could hurt the global ecosystem. Copper is a necessary resource for the survival of plants, animals, and humans. In humans and animals, small amounts of copper ensure healthy bone development. In plants, copper is an element involved in photosynthesis.23. Urgency and Lifetime: MEDIUM and 100s of years
24. Substitutes: RECYCling
25. Culture: NO
26. Human Rights: NO
27. Transboundary Issues: YES
28. Relevant Literature:
Abrahamson, Peggy. "EEC ending copper export quotas; European Economic Community." American Metal Market. Information Access Company. January 22, 1990. "Commodity Briefs." Journal of Commerce. January 5, 1989. "Copper and Brass Fabricators File for Import Relief." PR Newswire. November 14, 1988. "Copper, Brass Group files for Import Relief." Journal of Commerce. November 16, 1988. "EC Says it lifts Curbs of Copper Scrap Exports." Canadian Financial Report. Reuters Financial Service. December 4, 1989. Goodwin, Morgan E., "Copper Scrap 'dual' pricing is denounced, some Far East countries keeps domestic tags high." American Metal Market. Information Access Company. February 22, 1993. Islam, Shada. "EEC seen setting up panel, European Economic Community, Nonferrous." American Metal Market. Information Access Company. July 13, 1989. Kuster, Ted. "Commerce looking to Japan market, scrap." American Metal Market. Information Access Company. March 19, 1990. Recycling of Copper. http://koppar.org/environ/uk/ukrecyc.htm. Schmitt, Bill. "Europeans defend policies on exports of Copper Scrap." American Metal Market. Information Access Company. January 31, 1989. Silvestri, Trank. "European Export limits on Copper, Alloy scrap topic of US-EEC parly, European Economic Community." American Metal Market. Information Access Company. March 17, 1989. "United States to Investigate Exprot restraints on Copper Scrap." PR Newswire. December 29, 1988. "US and EC trade policies under scrutiny in GATT." Reuters Financial Report. June 20, 1989. "US Challenges European Community on Copper Export Quotas." The Xinhua General Overseas News Service. December 30, 1988. "US to examine EC, UK Curbs on Copper Exports." The Reuter Business Report. December 29, 1988.References
(1) "Copper and Brass Fabricators File for Import Relief." PR Newswire. November 14, 1988. (2) "US Challenges European Community on Copper Export Quotas." The Xinhua General Overseas News Service. December 30, 1988. (3) "US to Examine EC, UK Curbs on Copper Exports." The Reuter Business Report. December 29, 1988.