China is a leading producer of many raw materials that are used to make steel, chemicals, ceramics and other goods. But new taxes are restricting Chinese exports of the materials, leading to a supply crunch and price jumps in world markets, the industry representatives said. The resulting oversupply of raw materials in China keeps prices down in the country, giving domestic companies a significant advantage in the Chinese market, they said.

The testimony came during a hearing Thursday held by the Trade Policy Staff Committee, a panel of U.S. trade representatives and other Bush administration officials. The hearing will help the panel prepare an annual report for Congress due in December on China's compliance with World Trade Organization commitments.

A U.S. trade official said after the hearing that the export taxes are a "relatively recent development" and will be a key topic when the countries meet later this month to discuss issues involving steel trade.

"We're certainly focused on this as one of the issues," said committee member Timothy Stratford, assistant U.S. trade representative for China affairs. "I think the Chinese government understands our concerns."

Richard Kennedy Jr. of the P4 Coalition, representing the U.S. phosphorus chemicals industry, testified that in May, China imposed a 100% export tax on yellow phosphorus. He said the export tax violates the agreement China signed when it joined the WTO early this decade.

"If this measure is left unchecked, producers around the world will be unable to obtain yellow phosphorus at a competitive price," he said.

Other industry representatives who testified at the hearing, including makers of steel, textiles and computer software, credited China with taking some positive steps toward opening its market, but said the country maintains "protectionist" policies. The policies include currency manipulation, lengthy regulatory processes, lax enforcement of antipiracy laws and export taxes on raw materials, they said.

"I agree that there has been progress in China," said Myron Brilliant of the U.S. Chamber of Commerce. "I just don't think right now we have seen it yield enough results for our companies."