The World Trade Organisation (WTO) is turning into an important platform to target export bans on raw materials by member countries. The current debate on the WTO dispute concerning China’s ban on exporting several raw materials is important to follow because it can provide answers on how the Geneva-based multilateral trade body can help member countries access markets for exports and address issues surrounding the sourcing of raw materials from other member countries.
It is also important to watch this development because the US and the European Union (EU) have threatened to take India to dispute over the ban on cotton, stating that New Delhi’s ban is hurting global prices of cotton.
Reports state that the WTO is expected to come down on Beijing’s decision to limit the export of some of its major raw materials citing environmental reasons. The dispute started with China restricting the export of over 15 minerals of which it is among the largest producers in the world. Many large user industries of these minerals, like the steel industry, had petitioned governments in the EU and the US stating that the export restriction was hurting the production of final products like steel.
The dispute that began in 2009 is now likely to have other ramifications because there has been a large scale hue and cry among the high technology industry across the globe over China’s restriction on export of rare earth — a critical component for several products. If found guilty, China may face similar dispute at the WTO on its rare earth ban as well.
China had citied environmental reasons for imposing the restriction on the export of minerals that had been rejected by the developed countries. The WTO ruling will mean that if China does not remove the restrictions then it could face trade sanctions from the EU, the US and Mexico.
China is among the world’s largest producer of cadmium, gold, iron ore, lead, manganese and zinc. The debate of China versus some of the member states of the WTO has also taken a political twist because China is expanding its footprint across the globe to feed its hunger for raw materials. China has been reaching out to African, Asian and Latin American countries to fuel its raw material demands. Many countries see a dichotomy between China’s export ban and its hunger for raw materials. They are of the view that the export restriction is primarily aimed at feeding the domestic industry and not to protect the environment.
The WTO dispute opens a larger debate on the changing dynamics of global trade in which developing countries, like China or India, are slowly looking at moving away from the model of exporting raw materials to the developed world to produce value-added products. They are also keen on moving up the value chain and are of the view that they would like to use the raw materials in the country to feed their value-added industry. However, for China this decision is complex because it had agreed to remove export bans when it joined the WTO in 2001 at the Doha Ministerial meeting.
With an increasing number of developing countries producing value-added goods for global markets, the fight for access to raw material imports from other countries will be as big as the fight for market access for these final products.
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Disputes have risen in the recent past at the WTO with countries looking at various issues ranging from intellectual property rights (IPRs) violation to subsidies in products that hurt global trade. The slowdown in the economy has also triggered countries to look at how they could help domestic industry using the WTO agreements. Though analysts agree that disputes related to IPR or market access help world trade, there may be a need to take a closer look at issues such as import restrictions.
The debate over import restrictions may not, however, be a developing versus a developed country issue because many developing countries, too, look towards others for import of raw materials to fuel value-added exports.
It may be, therefore, important for the WTO to take stock of the emerging issues in world trade and debate on these so that it could feed into the on-going discussions of the Doha Round. It would be important for countries to look at the changing dynamics of global trade if the Doha Round agreement has to be of use to member countries. The Doha Round, which has been delayed considerably, should certainly reflect the needs of the coming years.
The author is Principal Adviser with APJ-SLG Law Offices