Australia threatens WTO action

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CANBERRA, Australia, Jan. 19 (UPI) -- Australian Prime Minister Julia Gillard has warned foreign mining firms in Australia that they would be reported to the World Trade Organization if it was found that Australian suppliers were locked out of local resource projects.

Gillard's warning comes in response to concerns raised by the Australia Industry Group that Chinese companies are being given preference in the supply of equipment and services for Australia's massive resource projects.

AIG had told the government the practice was occurring but had only anecdotal evidence.

"Any clear evidence of this will be taken by us to the World Trade Organization, because it's in breach of the rules and it's not giving Aussie manufacturers a fair go," Gillard told the Australian Broadcasting Corp.

"So my message would be to people who have got this anecdotal evidence that we need to take it to the next stage, to get the clear evidence and if clear evidence is available then we will certainly do everything we can to press the case internationally because it is not fair to Aussie manufacturing," Gillard said.

The Australian newspaper, for example, reported that confidential tender documents it had obtained indicate that Gindalbie Metals offered Chinese companies the chance to work on its $2.7 billion Karara iron ore project in Western Australia using Chinese standards for steel.

Gindalbie issued a statement denying that it favored Chinese companies.

The newspaper said the contract of 4,000 tons of steel was eventually awarded to Chinese steel company Ansteel, which is Gindalbie's biggest shareholder.

In response, an Ansteel spokesman told The Australian that domestic firms were offered the chance to bid for the same work on the Karara project using Australian standards but Ansteel was the most competitive "by a wide margin" and that more than 90 percent of spending on the Karara project had been on local content.

The Minerals Council of Australia maintains there is little evidence to support AIG's claims of preference.

Based on government data, "the facts and the figures show the mining industry source 88 percent of the goods and services locally," said Chris Fraser, the council's acting chief executive.

Fraser acknowledged that it's in the mining sector's interest to encourage strong, local competitive supplier groups. But because of the magnitude of some of the projects, "the capacity just isn't in there in the local firms to do some of that work."

China is Australia's biggest trading partner mainly due to China's strong demand for iron ore, coal and liquefied natural gas.

Australia had addressed the issue of local content last year, when Gillard announced that unless resources companies provide an equal opportunity for Australian manufacturers to supply a project, they could lose access to a 5 percent tariff reduction on imported materials for projects worth $2.08 billion or more.