Bridges Trade BioRes • Volume 8 • Number 17 • 3rd October 2008
EU warns against trade restrictions on raw materials
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European Union trade representative Peter Mandelson warned on 29 September that the EU may take action against countries that impose trade restrictions on raw materials.
“The goal of the EU’s trade policy is, and will remain, an open global market completely free of all distortions on trade in energy and raw materials,” Mandelson said in a speech to industry leaders in Brussels.
Europe, which imports 70 to 80 percent of its primary resources, wants to secure access to these raw materials, much of which are transformed by European industry into finished consumer products. But growing demand for primary materials from emerging economies has put pressure on the commodity supplies.
Mandelson said export duties act like indirect subsidies, making it much harder for industries in other nations to compete with domestic manufacturers. “Imposition of an export tax can price a European company out of the market overnight,” he cautioned. Globally, export restrictions also pose a problem as they can skew international price signals.
Mandelson said that the recent rise in global commodity prices has been matched “by a proliferation of export restrictions for commodities,” including at least 450 export restrictions on raw materials including metals, wood, leather, ceramics, chemicals and textiles.
In particular, Mandelson drew attention to export restrictions in Argentina, China, India and Russia: Argentina has taxes of up to 40 percent on the export of raw hides and skin; China has an export duties of 120 percent on yellow phosphorous and on coke of up to 40 percent; India taxes iron ore exports at 50 rupees per tonne; and Russia imposes a 50 percent export duty on scrap aluminium.
Many developing countries use export taxes to raise revenue and encourage domestic processing of raw materials. They have resisted efforts to constrain the use of such measures in negotiations at the WTO.
The US is currently considering challenging Chinese tax restrictions on exports of raw materials used in the steel industry through the WTO’s dispute settlement mechanism (see Bridges Weekly, 10 September 2008, http://ictsd.net/i/news/bridgesweekly/29066/). Mandelson said that he could not “rule out that the EU would use the WTO in the same way to enforce Chinese commitments” to its WTO accession obligations and that any instance of export duties that hurt European markets would also “attract the scrutiny of our trade defence system.”
Additional resources
To access Peter Mandelson’s full speech, visit http://ec.europa.eu/commission_barroso/mandelson/speeches_articles/sppm219_en.htm
ICTSD reporting; “Peter Mandelson prepares to fight Chinese export taxes alongside US,” THE TIMES, 29 September, 2008; “EU to act against raw material exports curbs,” REUTERS, 29 September, 2008.
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