TED Case Studies

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:

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Papua Mining
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Peru Mining
Zambia Copper Trade
Roman Bronze Trade
Copper/Chile
Summit Mine

4. Draft Author:

Jennifer L. Dopp March 3, 1997

B. 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 Pollution

15. 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.
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