Industrial production depends on trade in raw materials such as metals, minerals and natural resources. Prices and quantities of these materials are strongly influenced by global demand but also by policies in the countries that produce and export them.
Prices for many raw materials have increased significantly over the past few years. At the same time, producer countries are making greater use of measures which raise export prices, limit export quantity or place other conditions on exports. Countries use these export restrictions as a way to increase revenue, decrease domestic prices, promote downstream processing industries or conserve natural resources.
Materials affected by these restrictions in recent years include timber from Russia, chromite from India (used in chrome plating and in pigments) and rare earths from China (used to make computers and mobile phones). Food commodity exports have also been restricted; when food prices rose sharply in 2007-08 over 40 countries imposed various forms of export restrictions.
Negative effects of export restrictions
Export restrictions have negative consequences for international trading partners and producer countries. By diverting raw materials from export to domestic markets, these restrictions raise prices for foreign consumers and importers. At the same time, by reducing domestic prices in the producer countries and increasing global uncertainty about future prices, export restrictions discourage investment in extracting and producing raw materials - potentially reducing the overall supply of materials in the long term.
Also, export restrictions by a producer country may lead to a spiral of restrictions by other countries, which would mean further trade distortion and global price increases.
Businesses and policy makers alike are concerned by the increasingly restrictive and unpredictable environment of international trade in industrial raw materials. Multilateral disciplines governing the use of export restrictions are weak. There are no rules for using export duties, while policies behind export restrictions often lack transparency. This creates uncertainty for industries that depend on supply of these materials and raises the risk for investment in both mining and processing facilities worldwide.
Alternatives to export restrictions
Instead of restricting exports, many countries have used other policies that meet their objectives without distorting trade. For example, as a response to the food price increases of 2007-08, Brazil and South Africa reduced import tariffs on wheat and maize respectively. Chile, the world's leading producer and supplier of copper, applied a tax on the operating income of copper mine operators and directed the revenue from this tax towards development and innovation projects in mining and other sectors.
OECD work and recommendations
OECD analysis of the economic impact of export restrictions shows that there are more effective and less costly alternatives to export restrictions, and advocates a multilateral framework to discipline export restrictions at the World Trade Organization (WTO).
OECD has also compiled a comprehensive inventory of restrictions on raw materials, which will improve transparency and enable more informed policy dialogue within and across countries.
» Adapted from Trade in Raw Materials: Breaking Free from Export Restrictions (pdf, 2 pages, 110 KB)
Inventory of Restrictions on Exports of Raw Materials
This OECD inventory reports export taxes, prohibitions, licensing requirements and other measures by which governments regulate the export of industrial raw materials - minerals, metals and wood). Create your own customised tables and download the data.
- Transparency of Export Restrictions: A Checklist Promoting Good Practice
The incidence of export taxes, prohibitions and other measures that raise export prices, limit export quantities or place conditions on exporting is on the rise. Transparency can help mitigate the negative effects of export restrictions by enabling affected stakeholders to better understand and anticipate policy change and adjust their activities. This paper develops a checklist of good practice in transparency which can serve as a tool for self-evaluation by governments and for promoting better and more consistent transparency practices in this area. The items of the checklist are drawn from norms and practices found in WTO and regional trade agreements and good governance guidelines. Additionally, feedback was sought through a small business survey. The list provides guidance with respect to such questions as what, when and how information about export restrictions governments ought to make public. It assembles relevant principles for keeping stakeholders and the general public informed at different stages of developing and implementing export restrictions and identifies information content for an effective information policy. Transparency moreover depends on the ease with which information can be obtained and on the extent to which stakeholders have an opportunity to make their views known when a measure is still on the drawing board.
- Export Restrictions on Raw Materials: Experience with Alternative Policies in Botswana
Demand for non-renewable natural resources is forecast to rise steadily over the coming decades. Underlying trends of long-term rising demand and falling supply of mineral resources will inevitably increase pressure on prices and intensify competition for scarce resources. Some countries have successfully regulated their mining sectors without resorting to highly distortive policies such as export restrictions. One such country is Botswana. This paper examines some of the policies in place in Botswana that have contributed to the governance and management of its substantial minerals sector. Lessons are drawn for minerals-rich countries keen to manage their raw materials sectors for increased economy-wide growth. (OECD Trade Policy Paper No. 163)
- Export Restrictions: Benefits of Transparency and Good Practices
Transparent trade legislation, policies and practices benefit governments and business alike by reducing transaction costs and uncertainty, simplifying procedures and encouraging investment. This paper studies the information published online by 33 countries on their policies of export restrictions in the minerals sector, and presents a checklist of best practices for addressing gaps in the availability and accessibility of information. (OECD Trade Policy Paper No. 146)
- Mineral Resource Trade in Chile: Contribution to Development and Policy Implications
Instead of resorting trade measures such as export restrictions to manage its minerals sector, Chile manages its minerals sector through a combination of balanced taxation, stable investment measures, good management of tax revenue, exchange rate policy and initiatives aimed at producing a multiplier effect of economy-wide development, according to this study. (OECD Trade Policy Paper No. 145)
- Taking Stock of Measures Restricting the Export of Raw Materials: Analysis of OECD Inventory Data
Governments appear increasingly inclined to apply border and domestic measures to restrict the export of raw materials. For industrial raw materials, the OECD is constructing an Inventory of measures that have been applied since 2009. The underlying survey covers some 100 countries, some 15 types of measures and most minerals, metals and wood. This paper analyses 2009-2010 data collected so far for the minerals and metals sector. (OECD Trade Policy Paper No. 140)
- Multilateralising Regionalism: Disciplines on Export Restrictions in Regional Trade Agreements
In some instances, regional trade agreements (RTAs) explore policy areas that are the subject of few disciplines at the multilateral level, and may provide lessons and suggest good practices that could be used to inform discussions in a wider setting. One such policy area is export restrictions and taxes. This study suggests that there are a number of ways by which World Trade Organisation (WTO) disciplines in the area of export restrictions could benefit from the approaches found in some RTAs. (OECD Trade Policy Working Paper No. 139)
- OECD Workshop on Regulatory Transparency in Trade in Raw Materials, May 2012
Supply of non-energy raw materials has become an issue for many countries. Government measures limiting the export of these materials have contributed to recent price increases. This workshop was dedicated to issues of transparency of such export measures. Lack of transparency can in itself act as a trade barrier, making exporting and importing more difficult and having negative consequences for the industries involved and for the development of countries which could often greatly benefit from a strong export sector.
- Recent Trends in Export Restrictions
Export duties were applied by 65 out of 128 WTO member countries over the period 2003-2009, an increase on 1997-2002. These duties were introduced primarily by developing and least developed countries, and were mostly applied on agricultural products, minerals and metal products. This paper looks at the use of export restrictions in this period and at international disciplines on these measures. (OECD Trade Policy Working Paper No. 101)
- Export Restrictions on Strategic Raw Materials and Their Impact on Trade
Molybdenum, chromite and rare earths are among a range of metals and minerals essential for producing computers, hybrid vehicles and many more high-tech consumer goods. Industrial users and importing countries are concerned by recent export restrictions and their effect on the supply and prices of these materials. This paper examines cases of export restrictions by producer countries on these strategically-important raw materials, focusing on their stated objectives and actual impacts. (OECD Trade Policy Working Paper No. 95)
The Economic Impact of Export Restrictions on Raw Materials
Export restrictions on raw materials are applied to achieve a number of policy objectives. However, they can have a significant and negative impact on the efficient allocation of resources, international trade, and the competitiveness and development of industries in both exporting and importing countries.
In response to the growing concern on the use of export restrictions on raw materials, particularly by emerging economies, OECD held a Workshop on Raw Materials in Paris in October 2009. This book presents a selection of papers discussed at the workshop.
» Read the complete book online