JOIN USExport barriers are rising for commodities like food, coal, iron ore and coveted rare earths that have critical roles in high-technology devices as countries harden positions on what they see as a sovereign right to development.
The WTO ruled this month that China broke trade laws when it curbed exports of coveted raw materials, a verdict that seemed to cast doubt over nations’ right to control and use raw materials on their soil. Between October 2010 and April 2011, at least 30 new export limits were imposed by countries like China, India and Vietnam, up from 25 during the 12 months prior to that period, the WTO said in a report in June. Export curbs run the gamut from taxes to restrictive quotas and outright bans.
“Every country is trying to conserve its resources,” said R N Patra, head of the state-run Indian Rare Earths. “It is their right how they want to use them.” Indonesia had raised the minimum price of coal, Australia had a levy on a minimum price and even the United States had restrictions on the export of 10 elements, Patra added. “This did not exist a few years ago. But in the future there will be greater competition for resources,” he said.
As the world economy recovers from its slowdown, that battle for resources will only intensify, analysts said, although for now, many producing countries need the income from exports to plug large fiscal deficits. Increased export limits by developing countries stem from short-term protectionist motives rather than long-term industrial policy, said Razeen Sally, director of the European Center for International Political Economy, which is based in Brussels.
“There is a trend and a copying effect going on — when China does it, others will do it too. But I do not think this makes economic sense at all,” Sally said. “We can expect more cases to come to the WTO as we see many more of these restrictions. The case against China is important in the sense that it sends a signal that countries don’t have carte blanche when it comes to export restrictions.”
China controls 97 per cent of the world supplies of rare earths and has cited environmental concerns and resource depletion as its reasons for trimming exports. In extreme cases, a country that is a monopoly supplier of a commodity with limited substitution may drive out whole industries in a competing import-dependent country. That is why China’s curbs on rare earths have drawn so much attention, despite involving low trade volumes.
In the developing world, the issue of natural resources is an explosive one. Rising industrial activities fuel the demand for land, feeding conflict between companies and vast populations living in the countryside who form the core support base of governments. Those governments have been trying to ease the unrest with the strategy of getting investors to devote some of their income to the development of local communities.
India is drawing up a law to force private miners to share profits or make royalty payments, generating funds to aid local communities’ development in a bid to win popular approval for projects and undermine support for a Maoist rebellion.
As growing concern over the environment puts pressure on developing countries to cut carbon emissions, they are likely to hold on to resources crucial to building clean-energy equipment. “Energy security and concerns over carbon emissions will mean more and more countries will want to conserve their resources to build their alternative energy capacity or energy-saving equipment,” said Patra of Indian Rare Earths.