Chapter 1 RECENT DEVELOPMENTS IN THE USE OF EXPORT RESTRICTIONS IN RAW MATERIALS TRADE

Transcription

1 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 1 Chapter 1 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE Barbara Fliess, Christine Arriola and Peter Liapis Introduction For decades, trade policy negotiations have concentrated on reducing import barriers that governments use to impede access to national markets and protect domestic producers. The focus has widened in recent years, with governments and the private sector also paying much closer attention to policies and practices that hinder their access to raw material supplies from exporting countries. Industrial raw materials prices on world markets remained fairly stable during the 1980s and 1990s; since the early 2000s, however, world markets came under pressure from strong economic growth in major emerging and developing economies. Prices of many raw materials soared to historic levels from 2005, and although the adverse environment of the financial crisis abruptly reversed the trend in , countries engaged in extracting and exporting minerals have become more inclined to regulate output and trade. Many of these resources are critical inputs for industrial production and have to be procured by many countries through trade. A similar situation has developed in markets for agricultural products. Global demand for agricultural goods has been growing as a result of increasing world population, and higher world incomes have resulted in greater demand for more diversified, healthier diets. Strong demand and periodic weather-related production shortfalls have resulted in higher prices. When the prices of wheat, rice and other agricultural commodities reached record highs during , several governments concerned about inflation and the internal food security situation took steps to restrict export flows. Access to raw materials, including imported materials, determines in a sense the heartbeat of an economy. Traditional industries producing motor vehicles, machinery or steel are major consumers of basic and other minerals as inputs. Since the 1990s a range of new technologies has created additional demand for many industrial raw materials, often used in very small quantities although not visible to end-consumers. A smartphone, for example, contains from 9 to 50 different metals. An array of different minerals are used in areas of clean energy technology. Besides iron ore, ferrous scrap and various alloying metals for steel structures, wind turbines contain aluminium, cobalt, copper, zinc and certain rare earth metals. Building a hybrid car requires aluminium, cadmium, cobalt and at least 16 other metals. The number of non-renewable materials used to make a solar panel, or a LED light bulb, is even higher. Economic activity depends on raw materials, many of which are traded around the world because no country has domestic endowments of all the inputs needed. Thus, all economies are to some extent vulnerable to changing conditions in some raw material markets. The prospect of more restrictive export policies has prompted firms to factor the risk of less secure world market access to raw materials into their business strategies. Governments of countries that are reliant on procuring food and industrial raw materials abroad have also been following developments on global markets more closely. Where they are dependent on access to commodities that are produced abroad but are of strategic industrial and military value to their own economies, they have begun developing strategies for mitigating supply risks and reducing supplychain vulnerabilities caused by reliance on foreign supplies. 2 The issue of export restrictions and the

2 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 2 distortions they create in the global marketplace for raw materials and the products for which they are inputs has been raised in many trade policy discussions. The rise of tensions and outright conflicts underlines the importance of achieving a more restrained and orderly use of these measures. This chapter describes and analyses the spread of export restrictions in international trade in raw materials. It draws on recent OECD survey data on export restrictions available from 2009 to 2012 for industrial raw materials and for agricultural raw materials from 2007 to Section 1.2 outlines the development and the salient features of the global demand-supply relationships and trade in raw materials. Section 1.3 presents statistics compiled by the OECD on the incidence of measures that restrict raw materials exports, starting at the level of broadly defined product groups and trade relationships between countries and then examining in more detail the types of measures adopted and products affected. Section 1.4 looks at the situation of selected industrial and agricultural product groups, namely steelmaking raw materials, mineral waste and scrap, nonferrous metals, rice and wheat. Section 1.5 examines the motives that prompt governments to introduce export restrictions and identifies features of the measures and ways in which they are implemented from which the distorting effects on international trade can be gauged. Section 1.6 concludes Why the heightened concern about raw materials supplies in recent years? Demand for industrial and agricultural raw materials has grown consistently over the past 100 years in line with production. The pattern of supply and demand itself has also changed over time. For decades, developing countries were increasing and diversifying their production of raw materials, while demand for them especially for industrial raw materials was driven primarily by industrial growth in developed economies. Since the early 2000s, however, accelerating economic growth in China, India and other emerging economies has increased global demand for raw materials, which has contributed to a significant expansion of international trade. China provides the most striking example of recent changes taking place in some of these countries with expanding industries. In 1955, China was the leading producer of 14 commodities monitored by World Minerals Statistics, and by 2012 had become the leading producer of 44 commodities and a top-three producer of a further 12 commodities. Notwithstanding this, and despite a growing and diversifying mining sector, China s rapidly growing industries have not been able to meet all their mineral needs from domestic supplies and have sourced some of their requirements in the international market (British Geological Survey, 2014). Increasing incomes, changes in tastes, growing expectations to be able to consume seasonal products throughout the year, rising population and improved communication, transportation and logistics have all led to a steady expansion over time of global trade in agricultural goods. Between 2000 and 2012, trade in agricultural and food products grew at an annual average rate of 10% from less than USD 311 billion to just under USD 1 trillion. 3 As most of the population and income increases are taking place in the developing world, trade patterns have evolved accordingly. In agriculture, high income countries supplied 58% of the world s agricultural exports in 2000, but by 2012 their share had fallen to less than 45% reflecting the additional output emanating from developing countries. Even more dramatic is the drop in their share of agricultural imports falling from about two-thirds of the world s total to about 40% during this time. Developing and emerging countries are not only trading more with the developed world, they are also trading more with each other. South-South agricultural trade was only 14% of the total in 2000 as against a hugely increased 29% in Figure 1.1 tracks the evolution of global export volumes for the major categories of nonenergy commodities over the past decade. The increase in global minerals and metals requirements and production has led to sustained growth in world exports that was reversed only temporarily by the onset of the world financial crisis of Exports of minerals and metals have doubled since the early 2000s, reaching a record high of 2.3 billion metric tons in Exports of agricultural commodities rose by 74%, to 1 billion tons. Traded metal waste and scrap more than doubled

3 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 3 between 2000 and 2013 from some 48 million to 104 million tons, which is a rough estimate because UN Comtrade statistics in this sector are poor for many countries. Wood exports, on the other hand, declined by 30% during the same time period. Million metric tons 2500 Figure 1.1. Global exports raw materials, by sector (net weight) 2000 Minerals and metals Agriculture 500 Wood 0 Waste and scrap Note: Net weight of gross exports of unprocessed and semi-processed minerals, metals and wood products and all WTO-defined agricultural products. For the list of products that comprise each category in the figure see the methodological notes accompanying the OECD Inventory accessible at: Global exports refer to all countries of the world. Data excludes intra-eu trade. Source: UN Comtrade. Every country imports at least some of the raw material inputs necessary for industrial production. While dependence on access to foreign sources varies across economies and industries, exporting and importing economies alike have faced a situation of rising and also more volatile commodity prices in the last decade. Sometimes prices have skyrocketed in the course of a few months. For example, the price of rare earth metals as a whole doubled from 2010 to 2011, while prices of some elements like lanthanum and cerium (both rare earths) rose by 900%. Prices of antimony and tungsten more than doubled over this same period (Silberglitt et al., 2013). Agricultural commodities have experienced similar volatility. Between 1975 and 2000, cereal prices were low and stable, but this situation changed within a few years. Food prices as revealed by the IMF s food price index rose steeply between 2005 and 2008 to the highest levels in 30 years, before falling by 33% in the second half of Another peak in world food prices was reached in World market prices of individual agricultural commodities showed even more extreme swings, and remain much more volatile than in the first five years of this century (see Chapter 4, section 4.4 for more details). Thus, as demand for raw materials has increased, global markets have become tighter, prices have risen, and so has the tendency for countries supplying these markets to tax exports or erect export barriers in various ways. Export restrictions have become part of the problem of escalating prices and volatile markets for raw materials. They have caused growing apprehension among countries, both developed and developing, that depend on imports for foodstuffs and other raw materials. Several factors render concerns about restrictive export policies more acute. The first is that resource endowments, and consequently production of raw materials, have a very uneven geographical distribution. This is especially true for minerals and other industrial raw materials. For example, while nickel is mined in at least 30 countries, zinc in 40 countries, and silver in more than

4 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 4 50 countries, global supply of other minerals is concentrated in a small number of countries. In 2012, China alone produced 91% of the world s supply of rare earth metals on which products ranging from hybrid electric vehicles and energy-efficient light bulbs to cell phones and computer displays depend. Some 60% of the world s chromium, used mostly by the chemical and metallurgical industries, was produced in South Africa and Kazakhstan, which together account for 99% of all currently known chromite reserves. Almost 90% of world production of platinum and related metals occurs in South Africa and the Russian Federation. Recent world production shares of leading producers are shown in Table 1.1 for a number of raw materials. The production figures for minerals and metals mask the fact that known reserves are often less concentrated. The prospect of new supply coming into the market can act as a buffer when demand exceeds supply and prices rise. However, even when high prices lead to new investments, it takes years for mining operations to start. In contrast to minerals, agricultural commodities are renewable resources. All countries produce agricultural products, but some countries do not produce enough foodstuffs to feed their own populations and thus need to import them. Although world supply of agricultural commodities does not have the pronounced oligopolistic features of many markets for industrial raw materials, there are some large players here too (Table 1.1). Droughts or government interventions affecting supply in key producing regions can easily disrupt global commodity markets and upset trade relationships. Another factor heightening concern about restrictive export policies is that, in the short run, there are few or no substitutes available for many of the necessary inputs. For example, rare earth metals, antimony, and tungsten are difficult to replace without significantly increasing production costs or compromising the performance of the products in which they are used. Rare earths are used to make lasers and many components of electronic devices and defence systems, antimony is crucial for flame retardant plastics and textiles, and tungsten is used to produce cemented carbides for cutting tools used in many industries (Silberglitt et al., 2013). To safeguard against possible supply shortfalls, some industries and governments have stepped up efforts to stockpile industrial commodities essential for their operations (see, for example, Areddy, 2011, p.10). Similarly, the food price spike of 2008 has given impetus to initiatives at national and regional levels to hold more food stocks in reserve. In the case of manufactured goods, attempts are being made to reduce dependence on access to primary raw materials by recycling more secondary material (waste and scrap) so that it can be used in the making of new products. Steel, copper and aluminium are among the most recycled secondary materials today, which have become globally traded commodities. As prices for primary raw materials have risen, collecting and processing scrap for re-use has become increasingly cost-effective and small-scale secondary markets and trade opportunities are emerging even for metals used in minute quantities that are difficult to recover, such as rare earths. Another incentive for recovering scrap for recycling is that this process can be very efficient in saving water and energy, and is otherwise environmentally sound. The availability of secondary material for recycling depends on past production and is limited at national level. With demand growing, and in order to prevent shortages in certain geographical areas and surpluses in others, it is crucial to be able to trade metal scrap internationally as freely as possible. However, the global market for metal waste and scrap has also seen a steady increase in recent years in government-imposed export bans and other types of export restrictions. The increased use of export restrictions across raw materials markets has caused concern and friction, including two recent challenges at the WTO to the legality of export restraints imposed by China on a broad set of raw materials. 5 At the same time, there have been efforts to strengthen the disciplines on export restrictions of the multilateral trading system. While WTO rules on the use of import restrictions are numerous and extensive, those on export restrictions are more limited. These multilateral rules are described in Annex 1.A. Various proposals for improvement have been tabled during the ongoing Doha Round trade negotiations, but concrete steps in this direction could not be agreed. As Chapter 5 of this volume shows, the bulk of concrete recent achievements in

5 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 5 restraining the use of these measures has occurred in the context of negotiated regional trade agreements (RTAs). Table 1.1. Production for selected raw materials Product Major producers, by share of world production (2012) Top 5 producers share Figures in parentheses are percentage shares % Minerals and metals Antimony China (82), Tajikistan (4), Russia (4), Bolivia (3), South Africa (2) 95 Chromium South Africa (44), Kazakhstan (20), India (12), Turkey (9), Oman (2) 87 Cobalt Democratic Republic of Congo (68), China (5), Zambia (4), Australia (4), Cuba (3) 84 Copper Chile (32), China (10), Peru (8), United States (7), Australia (5) 62 Iron ore China (44), Australia (18), Brazil (13), India (5), Russia (4) 84 Lithium Chile (49), Australia (30), Argentina (9), United States (5), China (4) 97 Nickel Philippines (17), Russia (14), Indonesia (13), Australia (13), Canada (11) Platinum group metals South Africa (59), Russia (27), Canada (5), United States (4), Zimbabwe (4) Rare earth oxides China (91), United States (4), Australia (3), Russia (2) Brazil (0.2), Malaysia (0.1) Tin China (40), Indonesia (31), Peru (9), Bolivia (7), Brazil (4) 91 Tungsten China (83), Russia (6), Canada (3), Bolivia (2), Rwanda (1) 95 Wood products Coniferous industrial roundwood Non-coniferous tropical industrial roundwood United States (23), Canada (13), Russia (10), China (7%), Brazil (4) 54 Indonesia (28), Brazil (14), Malaysia (10), India (9), Thailand (5) 66 Agricultural commodities Maize United States (32), China (24), Brazil (9), European Union (7), Argentina (3) 74 Palm oil Indonesia (51), Malaysia (35), Thailand (4), Colombia (2), Nigeria (2) 93 Rice (milled) China (30), India (22), Indonesia (8) Bangladesh (7), Viet Nam (6) 73 Soya beans United States (31), Brazil (31), Argentina (18), China (5), India (4) 89 Soya oil China (27), United States (21), Brazil (16), Argentina (1), European Union (5) Wheat European Union (20), China (18), India (14), United States (9), Russia (6) Note: Figures for shares are rounded up. Production figures for minerals and metals are for ores and concentrates or, where applicable, further processed materials. Source: Production figures - Minerals and metals: British Geographical Survey (2014). Tropical industrial roundwood: ITTO (2012). Coniferous industrial roundwood: FAO (2014). Agricultural statistics from the US Department of Agriculture, Foreign Agriculture Service, Production, Supply and Distribution, on line Export restrictions stand out in the conduct of trade policy not only because the WTO disciplines regulating their use are less developed, but also because of the opaque way they are

6 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 6 used by governments, which makes it difficult to follow and predict what governments are doing or planning to do. Accurate, timely and accessible information about policy measures is a necessary condition for predicting supply and managing production risk. Opacity itself can be a formidable barrier to trade. Because the use of market-distorting export restrictions is less systematically notified to trading partners through the WTO system, making these policies more transparent is a challenge in its own right. To contribute to greater transparency, the OECD began collecting detailed information on export restrictions in the raw materials sector in 2009 (see the following section). Promoting more transparent use of these measures at national government level is another area where the OECD has been actively working. Some of the results of that work are presented in Chapter 6 of this volume Profiling the presence and spread of export restrictions In the past, comprehensive and up-to-date information on export restrictions has not been readily available. The WTO maintains databases of notifications that members must make when they use some types of export restraints, but these notification obligations are insufficiently enforced. Some industry associations have begun to monitor export restrictions for their members, but this is usually done for the specific sectors in which they operate. Some governments include export restrictions in their regular exercises of monitoring trade policies abroad that are of interest to their countries. In order to fill this information gap, the OECD started collecting information on export restrictions in 2009, systematically surveying a large set of countries and raw materials. The analysis in this chapter draws on this unique database. The OECD Inventory of Restrictions on Trade in Raw Materials (OECD, 2014a) (hereafter called the OECD Inventory) covers both industrial raw materials and primary agricultural and food commodities 6. The structure of each of the two parts of the Inventory is tailored to the type of information it contains and its availability. For industrial materials, the Inventory records restrictive trade measures for more than 80 industrial raw materials in their primary and semi-refined/processed state, and in waste and scrap form. 7 For this information, the survey aims to cover 84 countries (considering the EU as a single region) and data for the entire period 2009 to 2012 are currently available for 72 countries. The survey covers around 80% of world production volume of minerals, metals and wood in their primary state and a large share of related global trade (67% of 2012 total value of exports of primary materials, 45% of total exports of primary and semi-processed materials combined, and over 90% of exports of metals waste and scrap). For agricultural products, 16 countries are surveyed for export restrictions covering the whole range of agricultural commodities as defined by WTO. The most complete set of data for agricultural products covers the years 2007 to 2011, although for some countries available data extend outside this period. The list of surveyed countries and products is provided in Annexes 1.C and 1.D. Since many more countries were surveyed for industrial raw materials than for agricultural products, the analysis presented in this chapter uses the former part of the Inventory more extensively, complemented by selective information about export restrictions from one sector of agriculture, namely primary bulk commodities. 8 Overview The list of measures surveyed by the OECD Inventory is comprehensive, ranging from export taxes, prohibitions and non-automatic licensing requirements, to price and tax measures (Box 1.1). These measures are known to restrain export activity. They typically increase the relative price of exported products, decrease the quantity of exports supplied or change the terms of competition among suppliers. The different types of measures are explained further in Annex 1.B. The Inventory does not report export restrictions that are expressly sanctioned by international agreements in well-defined circumstances. 9

7 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 7 Box 1.1. Types of measures surveyed and recorded by the Inventory Export tax Export surtax Fiscal tax on exports Export quota Export prohibition Export licensing requirement Minimum export price/price reference for exports Dual pricing scheme VAT tax reduction/withdrawal Restriction on customs clearance point for exports Qualified exporters list Domestic market obligation Captive mining Other measures The OECD Inventory documents widespread use of export restrictions for industrial raw materials in recent years. Some of the measures recorded as being in force in 2012 (at HS6 level) have been in place for many years or even decades, but three quarters of them have been introduced since More than half the measures in effect in 2012 were introduced after 2009 and almost a quarter in Expressed as simple counts of measures recorded at the HS6 product level, 466 of over 2000 measures recorded as being in effect in 2012 were introduced in that year (Figure 1.2). Number of measures Figure 1.2. Year of introduction of measures present in 2012 Note: Measures are counted at the HS6 level of product classification. The measures are restrictions on industrial raw materials. Restrictions that expired and then were reintroduced in the following year were counted as a new introduction of a measure. Source: UN Comtrade. Of the 72 countries with data available for , 12 countries did not apply restrictions in 2012 for any of the surveyed products. The other 60 countries applied at least one restriction between 2009 and OECD Inventory entries exist for nearly all the 90 minerals, metals and wood products at the HS6 product level covered by the survey (see Annex 1.C) and this large number of products affected by restrictions has not changed since The agriculture and food section of the OECD Inventory covers numerous products, many of which were subject to export restrictions at least once during 2007 to Grouping these products into four general categories 10, horticultural products were the least affected by export restrictive measures, while semi-processed products were restricted the most often. Over this five-

8 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 8 year period, among the 16 countries whose agricultural trade data are recorded in the Inventory, there was a 58% probability that an individual country would impose an export restriction on at least one bulk product in any given year, relative to a 50% probability for semi-processed products. However, there were nearly twice as many individual restrictions in place on export of semiprocessed products (532 restrictions at HS6 level) relative to those of bulk products (278 restrictions at HS6 level). The measures applied covered the whole gamut of instruments listed in Box 1.1, with outright bans the most common (used by 13 of the 16 countries in the database), followed by export taxes (9 countries) and export quotas (9 countries). At times, countries used a combination of these measures, either concurrently or sequentially. Certain trends and patterns regarding the use of export restrictions and products affected can be seen: Export restrictions are broadly applied across all raw materials sectors, from minerals and metals, and metal scrap, to wood and agricultural commodities. The majority of restrictions are applied by emerging and developing countries. The period between 2009 and 2012 witnessed the introduction or tightening of over 900 measures at the HS6 product level in the industrial raw material sector. By comparison, only 400 measures in the Inventory were eliminated or relaxed during that period, and many of these resulted from the liberalisation commitments of countries such as Tajikistan, Ukraine and Viet Nam under their WTO accession protocols. As for primary agricultural bulk commodities, some 337 new or tighter measures (at HS6 level or higher) were added during , and some 70 measures were removed or liberalised. Many export restrictions imposed between 2007 and 2011 on agricultural commodities were temporary, sometimes lasting less than a year. For industrial raw materials, on the other hand, interventions tend to be medium- to long-term. It was rare that a measure in force in 2009 was discontinued in the course of the next three years. Governments use a variety of measures. A summary of the number of measures recorded in the OECD Inventory for 2012 is provided in Table 2. Non-automatic export licensing requirements and export taxes are particularly widespread across all three categories of industrial raw materials minerals and metals, metal waste and scrap, and wood. Governments also impose quantitative restrictions (prohibitions and quotas), notably on exported waste and scrap and primary bulk agricultural commodities, or resort to other policies that restrain export flows. While a detailed description of international trade patterns is beyond the scope here, it is useful to provide information on the size of the trade flows corresponding to the four categories of raw materials, the leading importers and exporters, and amount of trade affected by the export restrictions in the OECD Inventory. Worldwide imports of the more than 80 minerals and metals surveyed for the Inventory amounted to USD 1.2 trillion in OCED members, led by the EU and the United States, accounted for 44% of these imports. Moreover, 65% of the imports into the OECD area were sourced from other OECD member countries. 11 Seven per cent 12 of the 2012 total gross trade value of minerals and metals were subject to export restrictions in 28 countries with available trade data. While at this high level of product aggregation the incidence seems quite small, a more nuanced picture emerges for individual products within the minerals and metals sector. Metals account for the lion s share of exports value in this sector, with a large share of exports subject to restriction at the individual product level. They comprise 43 products and were exported to the value of USD 1 trillion in Metal products include aluminum, copper and other base metals widely used across industrial applications, but also the so-called technology metals that are critical inputs to many high-technology industries. More than a third of the exports of metals like thorium (63%), the metal group niobium, tantalum, vanadium (54%), tungsten (52%), and magnesium (46%) were subject to some form of export restrictions in

9 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 9 Table 1.2. Incidence of export restrictions by type of measure and sector Minerals and metals Metal waste and scrap Wood Primary bulk agricultural commodities Domestic market obligation 5 Export prohibition Export quota Export tax Licensing requirement Other export measures Total Note: Counts of measures are at the HS6 level of product classification. For the categories minerals and metals, metal waste and scrap, and wood: Since many products comprise more than one HS6 line and the number of lines per product varies, the simple count was adjusted by dividing counts at the product level by the number of HS lines constituting each product. This adjustment removes the bias inherent in simple counts of HS6 product lines. Other export measures include such items as restrictions on customs clearance points for exports, qualified exporters lists, the setting of minimum export price/price references and captive mining. For primary bulk agricultural commodities: the counts of measures shown are not adjusted. Argentina collects export duties of 5% on agricultural products. The OECD Inventory records only exceptions or changes to this policy. Only licenses related to export quotas are recorded for agriculture products. Source: OECD Inventory, as of June The impact of export restrictions is larger and more extensive when they are imposed on products whose world market are dominated by a few exporting countries trading with many importing countries. For example, the top 5 exporting countries account for 92% of the USD 1.9 billion magnesium export supply in China alone produced 85% of this metal 14 and accounted for about two-thirds of the value of magnesium exports whereas the shares of nine of the top ten importers ranged between 1% and 8%. South Africa, Rwanda, and Brazil made up three-quarters of total exports for the metal group niobium, tantalum and vanadium, which was mainly imported by China (38%), the EU (33%), and Thailand (14%). In instances where the source of trade is concentrated, like magnesium, the impact of export restrictions employed by one exporter is distributed across a larger number of importing countries. The remaining items in the industrial raw materials section of the OECD Inventory are 41 mostly non-energy industrial minerals. While at USD 183 billion they account for a minor share of the total trade in minerals and metals, some minerals are vital for every economy around the globe. Potash and phosphate rock materials, for example, are used in fertilizers, which are critical inputs for food production. According to US Geological Survey data 15, Canada and the Russian Federation together account for the bulk of world potash production but significant amounts are also produced in other countries, including Belarus and China, both of which have restricted exports in recent times. In 2012, 18% of potash exports were subject to restrictions by these two countries. For phosphates, the figure of restricted trade (of China and Malaysia) is 5%. Potash is a highly concentrated export market, where the top 5 exporters (Canada, Russian Federation, Belarus, United States and Jordan) account for almost all the trade (92%). Over 111 countries are recorded as having imported potash in For some countries, particularly those with a large agricultural sector, it is a significant part of their raw mineral imports. For example, potash represents 24% of Brazil s 2012 mineral and metal imports. World imports of wood products in the OECD Inventory totalled USD 56 billion in Led by the United States and Japan, OECD imports accounted for 51% of world imports. The largest importers were China (26%), Japan (15%), United States (12%), and the EU (11%), and the top 10 importers accounted for 80% of world imports. Heading the list of suppliers were Canada (14%), the EU (13%), the Russian Federation (12%), the United States (11%), and China (11%). Exports are heavily restricted. Overall, 39% of the value of world exports of wood products surveyed for the OECD Inventory were subject to export restrictions in at least 11 countries, by countries that were

10 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 10 for the most part leading producers and exporters in this sector. Exports of non-coniferous tropical plywood are both highly restricted and concentrated. The top two producing countries, Malaysia and Indonesia, applied export measures in Malaysia alone accounted for almost half (49%) of the total trade value and Indonesia over a third (37%). In contrast, the top 5 exporters of non-coniferous tropical sawnwood make up only 65% of world trade and only one of the top 5 exporters applied any restrictions. In the case of non-coniferous tropical plywood, the export policies have a larger effect, since a total of 111 countries import the product from a highly concentrated and highly restricted market. At some USD 84 billion in 2012, global trade in metal scrap and waste materials is just a fraction of trade in primary minerals and metals extracted from the ground. The largest importer of scrap was China (27%), then European Union (14%), Turkey and South Korea (11% each), and the United States and India (each 9%). The top 5 exporters were all OECD countries, led by the United States (24%), the EU (22%), Japan (7%), Canada (6%) and Australia (2%). The OECD Inventory reports that in 2012 restrictive policies targeting one or more scrap or waste items were in place in 39 (mostly developing) countries. Some 7% of exports of metals waste and scrap totalling USD 5.8 million (according to UN Comtrade) were affected in In fact, only a third of the products classified under waste and scrap were found in the UN Comtrade database. Aluminium, copper, platinum and steel are items where trade flows are reported more consistently across countries. For these items, the share of 2012 exports affected by the measures in the OECD Inventory ranged from 3 to 8%. In this sector, approximately 64% of trade was intra-oecd, and OECD countries sourced almost 80% of their imports from other members, a much higher share than their imports of primary minerals and metals. But with production of scrap being concentrated in OECD countries and twelve developing countries imposing bans on exports of waste and scrap, these trade patterns are not surprising. Total agriculture imports, as defined by the WTO, were valued at USD 914 billion in 2011, of which primary bulk commodities were 27%. Top importers of bulk commodities were China (18%). followed by EU (16%), Japan (7%), United States (6%) and Mexico (4%). Overall, non-oecd countries accounted for half of the imports. The non-oecd countries supplied about half of total exports as well. The leading exporters were the United States (25%), Brazil (15%), Argentina (7%), Canada and India (6% each). The 15 countries for which at least one export restriction was recorded during the period are all non-oecd countries. Among the bulk agricultural commodities, wheat, barley and rye were the subject of export measures in the Russian Federation, Argentina and Ukraine in 2011 (the latest year of available OECD Inventory data on export restrictions for agriculture). These countries were also among the top ten exporters of these primary products and accounted for 20% of the total trade. Of the three commodities mentioned, barley had the largest share of exports sourced from these countries with export restrictions (34%), while only 19% of wheat and rye exports came from these sources. Rice was also restricted in 2011, by Argentina, China, Egypt and Myanmar, which accounted for 4% of total exports. As is shown in the following sections, the situation occurring in 2011 and 2012 represents a point on a trend in export policy that already became apparent much earlier. Many restrictions were already in place in Especially in the minerals and metals sector, measures have been seldom discontinued, and many individual products have seen the number of export restrictions in force grow between 2009 and What measures do governments use? 1. Non-automatic export licensing requirements At the HS6 product level, non-automatic export licensing requirements are the measure most frequently reported by the OECD Inventory for minerals and metals. Exporters must obtain prior approval, in the form of a license or permit, to export the product. By reviewing applications for a licence on a case-by-case basis, governments can control who exports and how much. The process

11 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 11 of applying for a license generates extra transaction costs for exporting firms, in time and sometimes monetary terms. Moreover, when processing times are long or unpredictable, this hinders the ability of firms to react quickly to sales opportunities in foreign countries. In 2009, these measures were applied by 25 countries, including 8 countries that were among the top 5 world producers for at least one of the products affected. The number of countries was slightly higher in 2012 (26) and included more leading producers (9). They affected the trade of some 240 different primary and semi-refined or processed minerals and metals products, at the HS6 level of product classification. Table 1.3 lists the products most frequently subject to nonautomatic licensing requirements in 2012, along with the countries imposing them. China, the Dominican Republic, Malaysia, the Philippines and the Russian Federation figure prominently as countries where for many or even all of the products shown businesses must obtain a license to sell abroad. Apparently countries apply export licensing requirements to many products simultaneously or sequentially, rather than targeting particular products selectively. Table 1.3. Minerals and metals most frequently subject to export licensing requirements, 2012 Product HS6 lines, adjusted HS6 lines, simple count Number of countries Countries applying the measure Antimony Molybdenum Cobalt Tungsten Tin China, Grenada, Malaysia, Philippines, Russia, South Africa China, Grenada, Malaysia, Philippines, Russia, South Africa Argentina, China, Grenada, Malaysia, Philippines, Russia China, Grenada, Malaysia, Philippines, Russia, South Africa China, Grenada, Indonesia, Malaysia, Philippines, Russia Note: Excludes metal waste and scrap. The products comprise primary and semi-processed metals and minerals. The list of products shown is not exhaustive. Since many products comprise more than one HS6 line and the number of lines per product varies, the simple count was adjusted by dividing counts at the product level by the number of HS lines constituting each product. This adjustment removes the bias inherent in simple counts of HS6 product lines. Source: OECD Inventory, as of June Of the 22 different product groups comprising agricultural bulk commodities, exports of three products maize, rice and wheat were subject to licensing requirements in 2009 involving two countries, Argentina and Indonesia. The OECD Inventory contained no records for non-automatic export licensing requirements for agricultural commodities for either 2010 or 2011, the latest years for which it has data. 2. Export taxes In minerals and metals trade, export taxes are the second most frequently reported type of export restriction. In 2009, 22 countries, including 10 leading (top 5) producers, imposed such taxes on at least one product exported. 16 The total number of export-restricting countries increased by one in At least 55 types or groups of minerals and metals (excluding waste and scrap) were affected. In fact, all the products shown in the previous Table 1.3 with a high incidence of nonautomatic export licensing requirements are also among the products listed in Table 1.4 as being taxed most frequently. Export taxes are applied either ad valorem, calculated as a percentage of the value of the export, or as a specific tax, with the exporter paying a given amount of money per unit of the export. Some governments collecting ad valorem taxes also prescribe a minimum monetary amount that

12 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 12 exporters must pay per ton of material shipped (e.g. 25% or EUR 330/ton, whichever is greater). Ad valorem taxes will be examined in greater detail in a later section of this chapter. The rationale for taxing exports often has to do with governments need for revenue. Some governments tax exports of primary mineral commodities only, others only exported semi-processed materials. Sometimes export duties are applied to materials both in their primary and semi-processed forms, and with systematically different rates depending on their processing or fabrication stages. This is sometimes observed with import tariffs: to encourage value-addition to be carried out locally, lower import tariffs are imposed on raw materials while higher rates are levied for imported products competing with local producers at further stages of processing. As illustrated in Box 1.2, governments may decide to cascade the taxation of exports in order to encourage transformation of local raw materials at home. Table 1.4. Products most frequently subject to export taxes, 2012 Product HS6 lines, adjusted HS6 lines, simple count Number of countries Countries applying the measure Copper Tungsten Cobalt Argentina, China, Colombia*, Dominican Republic, Malaysia, Russia, Ukraine, Viet Nam, Zambia Bolivia, China, Dominican Republic, Russia, Viet Nam Argentina, China, Dominican Republic, Viet Nam Antimony Bolivia, China, Dominican Republic, Viet Nam Manganese China, Dominican Republic, Gabon, India, Viet Nam Molybdenum China, Dominican Republic, Russia, Viet Nam Tin Silver Zinc Bolivia, China, Dominican Republic, Ukraine, Viet Nam China, Dominican Republic, Fiji, Malaysia, Viet Nam China, Dominican Republic, Malaysia, Viet Nam Titanium China, Dominican Republic, Viet Nam Zirconium China, Dominican Republic, Viet Nam Lead Iron and steel China, Dominican Republic, Malaysia, Viet Nam Argentina, China, Dominican Republic, India, Ukraine, Viet Nam Note: Excludes metal waste and scrap. The term export tax refers to export taxes, export surtaxes and fiscal taxes on exports. The products comprise primary and semi-processed metals and minerals. * Columbia applies to polymetallic concentrates. The list of products shown is not exhaustive. Since many products cover more than one HS6 line and the number of lines per product varies, the simple count was adjusted by dividing counts at the product level by the number of HS lines constituting each product. This adjustment removes the bias inherent in simple counts of HS6 product lines. Source: OECD Inventory, as of June 2014.

13 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 13 Viet Nam Box 1.2. Examples of export tax variation according to degree of processing A multi-tiered taxation regime is applied to exports from the mining sector. The policy includes the following features. Exporters of iron ore and concentrates, the raw material in its least processed form, must pay a 40% export duty. For iron and steel scrap, the government charges a lower tax of 15-17% on shipments abroad whereas exporters of iron ingots and other semi-finished products made from alloy and non-alloy steel pay just 2%. For copper, a 30% tax must be paid for ores and concentrates, a 22% tax for copper waste and scrap and 10-20% for copper that is semi-processed (copper mates, etc.). For other materials including nickel, cobalt, aluminium, lead and zinc, the government collects a 22% tax on ores and concentrates, 22% for waste and scrap and 5-15% for semi-processed material. For molybdenum, it charges a 20% tax on ores and concentrate, a 22% tax on waste and scrap and a 5% tax on semi-processed material. Argentina Although not stated as the rationale for the tax structure used, Argentina s export taxes favour exports of processed products over primary raw materials, and hence are supportive of local processing activities. Exporters pay a 10% export tax when exporting iron ores and concentrates, which falls to 5% for semi-processed items. Iron and steel waste and scrap is also taxed at 5%. The same export policy and rates are applied to the different processing stages of copper and cobalt. In the case of borates, the export of the primary natural borate and concentrate is taxed at 10% whereas the rate on borate-related chemical compounds is 5%. The 5% tax rate for waste and scrap applies to a long list of different types of metal; these metals are not taxed if exported as primary or as semi-processed materials. Federation of Russia The Russian Federation is one of the world s leading exporters of wood products. In recent years the government has applied tax rates ranging from 25 to 80% on exports of raw logs (roundwood in the rough), reportedly in order to slow down the shipping of raw logs and encouraging more domestic lumber manufacturing in the Russian Federation (Hamilton, 2008). For wood in more processed form, such as sheets for veneering, a lower rate of 5% applies. Source: OECD Inventory, as of June 2014; Hamilton (2008). Some governments collect other kinds of export taxes. According to the OECD Inventory, four countries collected fiscal taxes or royalties on certain exported raw materials during : Afghanistan (rare earth elements), Colombia (polymetallic concentrates), the Dominican Republic (aluminium, chromium and other metals) and Guinea (bauxite). Two other countries imposed special surtaxes: Bolivia (many base, minor and other metals), and China (phosphates and potash). The share of world exports subject to all types of export taxes recorded by the OECD Inventory exceeded 40% for several products: graphite (66% of world exports), tungsten (51%), thorium (49%), magnesium (45%) and barytes (41%). These are conservative estimates, since due to its methodology for screening countries the Inventory has probably not captured all export restrictions in force for each product. Moreover, since export restrictions dampen trade flows, the figures for restricted exports are lower than what they would be without the restriction. Four agricultural bulk commodities were taxed in 2011: barley, oil seeds, soybeans and wheat. Of these, oilseeds were most frequently targeted, and the countries applying export taxes were Indonesia and the Russian Federation. This was followed by wheat with two items taxed by Ukraine. Soybeans and barley each had one restriction, imposed by the Russian Federation and Ukraine, respectively. For agricultural products, governments preferred export taxes, followed by quantitative restrictions. 3. Quantitative export restrictions Perhaps because the multilateral rules of the WTO set strict conditions for their use, quantitative export restrictions (export prohibitions and, occasionally, export quotas) are less common. As can be seen from Table 1.5, five countries applied these measures to exports of wood products. Among the countries in the OECD dataset only China used quotas to control the export of minerals and metals in the period China applied these measures to 44 products (at the HS6 level) in 2012, slightly down from some 46 products in the previous three years. The products

14 RECENT DEVELOPMENTS IN THE USE OF EPORT RESTRICTIONS IN RAW MATERIALS TRADE 14 cover a range of ferrous and non-ferrous base, minor and precious metals in ore, concentrate and further processed forms, and also as waste and scrap. The share of world exports subject to quantitative export restrictions was highest for antimony (50% of world exports), tungsten (45%), magnesite (44%), fire-clay (43%) and rare earths (39%). As will be shown later, quantitative restrictions appear to be more often the instrument of choice for governments that wish to restrain the international trade of waste and scrap. This is also true for agricultural products. Table 1.5. Industrial raw materials most frequently subject to export quotas and prohibitions, 2012 Product HS6 lines, adjusted HS6 lines, simple count Number of countries Countries applying the measure Sawnwood, coniferous Canada, Indonesia, United States Industrial roundwood, coniferous Indonesia, Russia, United States Industrial roundwood, nonconiferous tropical Indonesia, Nigeria Molybdenum China Tin China Antimony China Tungsten China Note: Excludes waste and scrap. The products comprise primary and semi-processed products. The list of products shown is not exhaustive. Since many products comprise more than one HS6 line and the number of lines per product varies, the simple count was adjusted by dividing counts at the product level by the number of HS lines constituting each product. This adjustment removes the bias inherent in simple counts of HS6 product lines. Source: OECD Inventory as of June Regarding agricultural bulk commodities, Ukraine resorted to quotas in 2011 in order to restrict export of barley, maize, rye, wheat and other grain. Argentina, too, curbed wheat exports through quotas. The number of countries applying export bans was higher, and the bans affected more products. Myanmar and the Russian Federation restricted the most products. Myanmar banned exports of cotton, peanuts and rice, and export bans for maize, rye and wheat were in place in the Russian Federation, for grain flour and groats in Macedonia, for oil seeds in Belarus, for rice in Egypt, and for wheat in Moldova. 4. Other measures Some governments use other types of instrument that restrict exports in less obvious ways. One way is to refuse reimbursement of value-added tax (VAT) on exports. Governments with VAT systems usually reimburse VAT on exports, and by denying such reimbursements, in part or in full, they make it less attractive to export a product as opposed to selling it locally. This was a tactic used by China in 2010, when the government decided to withdraw the VAT rebate for some 20 minerals and metals. According to OECD Inventory data, China has also used this policy to discourage sales abroad of agricultural products. Thus, in recent years exporters of 93 different horticultural, semi-processed and processed agricultural products at HS6 level have found their VAT rebates being cut or disappearing. The bulk of these actions occurred in In some other cases, firms that wish to export specific commodities are obliged to register with government authorities. In Ghana, exporters of certain wood products reportedly must pay to obtain a registration certificate that is valid for a limited period of time. Similarly, Indonesia keeps a qualified exporters list for precious metals and plywood. As part of China s extensive export control regime, MOFCOM has, for several raw materials, lists of enterprises that are allowed to export (see American Scrap Coalition, 2008, p.10-11). These practices resemble export licensing requirements. Argentina, Indonesia and the Russian Federation appear to restrict exports by, inter alia, stipulating minimum export prices or issuing reference prices that exporters are expected to observe. In 2010 Argentina started to enforce reference export prices for a wide range of minerals