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

EXPORT RESTRICTIONS IN RAW MATERIALS TRADE: FACTS, FALLACIES AND BETTER PRACTICES © OECD 2014

Chapter 1

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

Barbara Fliess, Christine Arriola and Peter Liapis1

1.1. 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 2008-09, 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 2007-2009, 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 supply-chain vulnerabilities caused by reliance on foreign supplies.

2 The issue of export restrictions and the



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 2011. 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, non-ferrous 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.

1.2. 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 2012.

Figure 1.1 tracks the evolution of global export volumes for the major categories of non-

energy 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 2008. Exports of minerals and metals have doubled since the early 2000s, reaching a record high of 2.3 billion metric tons in 2013. Exports of agricultural commodities rose by 74%, to 1 billion tons. Traded metal waste and scrap more than doubled



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.

Figure 1.1. Global exports raw materials, by sector (net weight)

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: http://qdd.oecd.org/subject.aspx?subject=8F4CFFA0-3A25-43F2-A778-E8FEE81D89E2. 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 2008. Another peak in world food prices was reached in 2011.

4

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

Agriculture

Minerals and metals

Waste and scrap

Wood

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Million metric tons

http://qdd.oecd.org/subject.aspx?subject=8F4CFFA0-3A25-43F2-A778-E8FEE81D89E2



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



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)

68

Platinum group metals South Africa (59), Russia (27), Canada (5), United States (4), Zimbabwe (4)

99

Rare earth oxides China (91), United States (4), Australia (3), Russia (2) Brazil (0.2), Malaysia (0.1)

100

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

United States (23), Canada (13), Russia (10), China (7%), Brazil (4) 54

Non-coniferous tropical industrial roundwood

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)

84

Wheat European Union (20), China (18), India (14), United States (9), Russia (6)

68

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 http://apps.fas.usda.gov/psdonline/psdQuery.aspx.

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

http://apps.fas.usda.gov/psdonline/psdQuery.aspx



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.

1.3. 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



Box 1.1. Types of measures surveyed and recorded by the Inventory

Export tax Dual pricing scheme

Export surtax VAT tax reduction/withdrawal

Fiscal tax on exports Restriction on customs clearance point for exports

Export quota Qualified exporters list

Export prohibition Domestic market obligation

Export licensing requirement Captive mining

Minimum export price/price reference for exports 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 2007. More than half the measures in effect in 2012 were introduced after 2009 and almost a quarter in 2012. 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).

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 2009-2012, 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 2012. 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 2009.

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 2011. 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-

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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 semi-processed 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 2007-2011, 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 2012. 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 cent12

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 2012. 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 2012.

13



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

2012 2012 2012 2011

Domestic market obligation 5

Export prohibition 3 129 9 25

Export quota 20 9 2 7

Export tax 144 141 6 9

Licensing requirement 172 226 27 -

Other export measures 27 47 9 3

Total 371 552 53 44

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 2014.

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 2012. China alone produced 85% of this metal14

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 2012. 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 2012. 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



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 2012. 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 2012.

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 2007-2011 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 2009. 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 2012.

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



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 non-automatic 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 8.5 11 6 China, Grenada, Malaysia, Philippines, Russia, South Africa

Molybdenum 8.4 21 6 China, Grenada, Malaysia, Philippines, Russia, South Africa

Cobalt 8 10 6 Argentina, China, Grenada, Malaysia, Philippines, Russia

Tungsten 7.5 13 6 China, Grenada, Malaysia, Philippines, Russia, South Africa

Tin 7.25 14 6 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.


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 2012. 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 non-automatic 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



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



Number of countries


Copper 9.47 88 9 Argentina, China, Colombia*, Dominican Republic, Malaysia, Russia, Ukraine, Viet Nam, Zambia

Tungsten 9.00 18 5 Bolivia, China, Dominican Republic, Russia, Viet Nam

Cobalt 8.00 10 4 Argentina, China, Dominican Republic, Viet Nam

Antimony 7.50 10 4 Bolivia, China, Dominican Republic, Viet Nam

Manganese 7.00 7 5 China, Dominican Republic, Gabon, India, Viet Nam

Molybdenum 6.40 17 4 China, Dominican Republic, Russia, Viet Nam

Tin 6.25 13 5 Bolivia, China, Dominican Republic, Ukraine, Viet Nam

Silver 5.00 11 5 China, Dominican Republic, Fiji, Malaysia, Viet Nam

Zinc 4.38 14 4 China, Dominican Republic, Malaysia, Viet Nam

Titanium 4.00 5 3 China, Dominican Republic, Viet Nam

Zirconium 4.00 5 3 China, Dominican Republic, Viet Nam

Lead 3.86 9 4 China, Dominican Republic, Malaysia, Viet Nam

Iron and steel 3.63 73 6 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.




Box 1.2. Examples of export tax variation according to degree of processing

Viet Nam

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 2009-2012: 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 2009-12. 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



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



Number of countries


Sawnwood, coniferous 3.0 3 3 Canada, Indonesia, United States

Industrial roundwood, coniferous 2.5 5 3 Indonesia, Russia, United States

Industrial roundwood, non-coniferous tropical

2.0 4 2 Indonesia, Nigeria

Molybdenum 2.4 6 1 China

Tin 2.0 5 1 China

Antimony 2.0 3 1 China

Tungsten 1.5 4 1 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 2014.

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 2007.

17

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



and metals shipped to specific countries, which it then periodically adjusted. Indonesia applies a minimum price regime for wood exports and the Russian Federation does the same for diamonds. Pakistan in 2008 and Viet Nam in 2008, 2009 and 2010 used similar measures for rice exports.

In yet other cases, firms in India are required to pay a 20% congestion surcharge for all traffic to Bangladesh and Pakistan. The government also awards mining rights preferentially to companies that use domestically sourced iron and steel, manganese and coke in their own domestic processing operations. As captive mining concessions increase their share of production, less material is available for sale on the free market, including for destinations abroad. Procedures can, by themselves, hamper or discourage export activity. The Russian Federation reportedly has in recent times designated the customs points through which certain exports must clear. This affected more than 25 countries importing items like refined copper products and iron and steel scrap from the Russian Federation.

The picture of restrictions and the resulting distortions of international trade is more complex still because the majority (34) of countries with restrictions in the OECD Inventory made use of more than one type of measure when restricting industrial raw materials exports. Over the period 2009-12, Indonesia and the Russian Federation, followed by Canada, China, and India employed the greatest variety of different measures: six different measures for Indonesia and the Russian Federation and five for India, Canada, and China, respectively. Eight other countries used three measures (Afghanistan, Belarus, Benin, Ghana, Rwanda, Thailand, Ukraine, and Uruguay) and 20 countries employed two types of measure.

1.4. Analysis by sector

As for products affected by export restrictions, two industrial sectors stand out as ones where restrictive export policies flourish: steelmaking raw materials, and metals waste and scrap. These sectors are examined more closely in this section, along with a group of non-ferrous minor metals, which merits attention because many of these metals are critical inputs for products at the technology frontier. Finally, the situation in the markets of rice and wheat is presented. The cereals markets (mainly maize, rice and wheat) comprise some of the most traded agricultural products and provide much of the caloric requirements for a large segment of the world’s population.

It is striking that, in the following sector-specific analysis, the same countries appear as both major exporters of industrial raw materials and as regular users of various kinds of export restriction for these exports. Yet it would be far too simplistic to categorise trading partners in raw materials markets as consisting of, in one camp, exporting countries that are willing to use restrictions to further domestic policy objectives but with insufficient regard for any market disruptions and artificially high prices they may cause, and in the other camp, importing countries that are passive recipients of the consequences of these policies, with little leverage over the situation either individually or (so far) collectively. As Table 1.6 shows, large exporters who make regular use of restrictions in markets for some minerals are often heavily reliant on imports of other minerals, where they may face a restricted supply due to the use of similar trade instruments by other countries. This suggests that a collective tightening of discipline concerning export restrictions for these tradeables may create surprisingly few ‘losers’, and that a multilateral consensus in this direction may be more achievable than many expect. Chapter 3 presents results from a simulation exercise that support this view.



Table 1.6. Industrial materials exports and imports, of selected countries using export restrictions

(million USD)

Country Export restrictions applied in 2012 Exports of

minerals (2012) Imports of

minerals (2012)

Argentina Export tax for most goods, including minerals Export licensing requirement for iron, copper and cobalt

2 223 992

China Export quota for bauxite, magnesium, molybdenum, phosphates, rare earth metals and other Export tax for copper, cobalt, iron, manganese, rare earth metals, tungsten, zinc and other Export licensing requirement for bauxite, molybdenum, phosphates, talc, thorium and tin

3 180 140 939

India Export tax for chromium, iron, manganese, mica Export licensing requirement for chromium, manganese, silica sands Captive mining policy for coke, iron and steel, and manganese

6 083 24 524

Indonesia Export prohibition for silica sands Export licensing requirement for precious metals and stones Qualified exporters list for diamonds

5 151 1 206

Kazakhstan Export tax for aluminium products 4 605 688

Russia Export tax on coke, molybdenum, tungsten and diamonds Export licensing requirement for bauxite, antimony, cobalt, copper, sulphur, tin and other Domestic market obligation for certain precious metals and diamonds Minimum export price measure for precious metals and stones

9 043 2 835

South Africa Export licensing requirement for antimony, cadmium, chromium, copper, lead, molybdenum, precious metals and other Export tax for diamonds

13 650 921

Note: Trade figures refer to the countries’ total exports and imports of all unprocessed minerals and metals surveyed for the OECD Inventory. Semi-processed minerals and metals, and metal waste and scrap, are excluded. The export restrictions and products mentioned are not exhaustive.

Source: UN Comtrade HS2007.

Iron and steel and steelmaking raw materials

Steel is one of the most widely produced industrial products in the world, with around 90 countries producing it (World Steel Association, 2013). The steelmaking sector depends heavily on a range of minerals and metals – around 18 materials (such as iron ore, coke, iron and steel scrap manganese, chromium, tin and zinc) are used as inputs for steel.

The 38 economies that imposed export restrictions on these steelmaking raw materials in both 2009 and 2012 accounted for a total of one billion metric tons of crude steel production and one billion metric tons of hot-rolled production in 2012, or 68% and 71% of the world total, respectively (OECD, 2014b). Many of these countries are either very small steel producers or have such limited production that data are not even available. There are, however, several very large producers of steel on the list, including China, India, Japan, the Russian Federation, as well as a number of medium-sized producers such as Indonesia, Kazakhstan, Malaysia, South Africa,



Thailand, Ukraine, the United Arab Emirates, Venezuela and Viet Nam. The actions of these larger players can strongly influence the global markets for coke, iron ore and other primary inputs. As major producers of steel, they are also among the leading countries generating steel scrap and their export policies influence global scrap prices and supply.

Figure 1.3 shows that in 2012 raw material export policies were generally more restrictive than in 2009 for iron ore, coke and ferrous scrap, the three main steelmaking raw materials that, by weight and volume, represent the vast majority of raw materials used in steel production. Developments since 2012 have led to less restrictive policies in a few cases, while in most other cases policies have become more restrictive. The OECD Inventory also monitors measures affecting trade in semi-processed ferrous metals products. Here, export restrictions appear to play a more limited role and their use fell slightly from 2009 to 2012.

Figure 1.3. Count of measures restricting exports of steelmaking inputs and iron and steel products (2009, 2012)

Note: A count of measures was made per HS6 product line. As 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.

Source: OECD inventory, as of June 2014.

Various types of measure are used to restrict exports of steelmaking raw materials. For iron ore, coke and ferrous scrap, the three main steelmaking raw materials, export licensing requirements have been the most frequently used measure in recent years. Such licensing requirements were applied by 20 governments on ferrous scrap exports in 2012, by five governments on their iron ore exports and by two governments on coke exports, according to the OECD Inventory data. As shown in Figure 1.4, export taxes were the next most frequent measure. In 2012, 14 countries imposed taxes on ferrous scrap exports, five countries on iron ore exports, and two countries on coke exports. Over the period surveyed, the incidence of export prohibitions for steel scrap increased noticeably.

0 5 10 15 20 25 30

Iron & steel - ferrous metals (semi-processed)

Iron & steel waste & scrap

Iron ore

Coke

2009 2012



Figure 1.4. Restrictions on exports of core steel making inputs in 2009-2012, by share of types of measure

Note: The calculation covers the following products: coke, iron ore, iron and steel waste and scrap and iron and steel ferrous metals (semi-processed). Based on counts adjusted for the number of lines per product.


Metal waste and scrap

Export restrictions have proliferated in recent years for metal waste and scrap. This is a relatively young but fast growing industry dominated by ferrous scrap used in steel production. Exports have become extensively regulated in many regions of the world and almost the full range of secondary products is affected.

Official trade statistics are particularly sketchy for this sector. According to UN Comtrade figures, world exports of metal waste and scrap totalled 84 billion USD in 2012. Some 60% of this trade is conducted by OECD countries, and OECD countries import predominantly from other OECD countries, especially from Europe and North America, which lead the rest of the world in generating and consuming scrap and which trade freely.

Exporters in other regions, however, have increased their use of restrictions. According to the OECD Inventory data, Argentina, China, India, Morocco and four other countries introduced or tightened export controls in 2009. In 2010, twelve countries took such action, and five and seven other countries followed in 2011 and 2012, respectively. As Figure 1.5 shows, by 2012 conditions of trade had deteriorated for almost every type of metal waste and scrap. Few governments had moved to lift restrictions already in place in 2009, and exports of some 30 different types or groups of scrap were under restriction in 39 countries. Exports of ferrous waste and scrap used in steelmaking, the largest segment of the world scrap market, were restricted most often, i.e. by 34 countries. This was followed by aluminium and copper (29 countries each), lead and zinc (26), antimony and magnesium (23), and beryllium, nickel, tin, and tungsten (22). While export restraints are used almost exclusively by emerging economies and developing countries, the question of safeguarding scrap supplies for local industries is also being debated today in some developed countries.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2012

2011

2010

2009

Export prohibition Export quota Export tax Licensing requirement Minimum export price / price reference for exports Other export measures



Figure 1.5. Count of measures restricting exports of metal waste and scrap (2009, 2012)

Note: A count of measures was made per HS6 product line. As some types of metal scrap comprise more than one HS6 line and the number of lines per type of scrap varies, the simple count was adjusted by dividing counts at the product level by the number of HS lines constituting each product. The figure does not show some items like Hafnium, Mica, Other ash and residues.


As Figure 1.6 shows, metal waste and scrap is a sector where outright export prohibitions are gaining in importance relative to other types of measure. In fact, OECD Inventory records suggest that export prohibitions account for a much higher share of total export restrictions in this industry (8% in 2009 and 23% in 2012) than in the primary minerals and metals industry (5% in 2009 and 14% in 2012). Of course, export taxes, export license regimes and other measures, too, can make exporting prohibitively costly. In Mauritius, for example, to qualify for a scrap metal export licence a company must be Mauritian-owned, have a specific site plan, have been in the business for at least 12 months before the date of application for the license, and have undergone an inspection of its scrapyard. Moreover, the licence is valid for six months only and costs MUR 50 000 (approximately USD 1 650). These onerous conditions did not stop exports, but they plunged by 44% in 2009 when the measure was introduced.

The high and growing incidence of outright export prohibitions is confirmed for ferrous waste and scrap, which has seen trade surge from a mere 9.3 million tons in 1990 to 103 million tons in 2012 (World Steel Association, 2013). In 2012, prohibitions (mostly adopted by small exporting countries) accounted for 28% of all restrictions in place in this sector, up from 18% in 2009. This gives the wrong signals in a global market where supply is struggling to keep up with demand. An estimated 490 million tons of ferrous scrap was produced worldwide in 2011, while industry figures put world consumption at 570 million tons, up 7.6% from 2010.

18 Of the world’s leading regions

0 5 10 15 20 25 30

Antimony

Tin

Tungsten

Iron and steel

Magnesium

Molybdenum

Beryllium

Nickel

Tantalum

Copper

Cadmium

Chromium

Cobalt

Titanium

Zirconium

Manganese

Bismuth

Lead

Zinc

Aluminium

Thallium

Gold

Platinum

Silver

Arsenic, mercury, thallium

2009 2012



generating ferrous scrap (EU, China, United States, Japan, the Russian Federation), the Russian Federation and China have erected export tariff walls for the benefit of domestic user industries. Exports from the Russian Federation have declined significantly over the last decade. Increasing generation of scrap within China and the discouragement of its exportation are working to diminish the country’s reliance on imported steel scrap.

19 As demand from steel producers around the globe

for ferrous scrap continues to grow but trade becomes ever more regulated, global competition over access to this material will grow fiercer.

Figure 1.6. Restrictions on metal waste and scrap exports in 2009-2012, by share of types of measure

Note: Based on counts adjusted for the number of lines per product.


Non-ferrous minor metals

Traditionally, the term “minor metals” denotes metals that are not traded on formal exchanges, although cobalt and molybdenum are now traded on the London Metal Exchange along with major base metals. Non-ferrous minor metals share certain other characteristics. They are often extracted as by-products of non-ferrous base metals and, compared to aluminium, copper and other major base metals, have a relatively low annual production volume but high unit value. They serve as crucial inputs for high-technology industries and their use is typically very specialised – for example, for filaments in light bulbs, electronic pastes, semi-conductors, components in mobile phones and tablets, and as alloying agents in specialty steels for the automotive and aerospace sectors. Metals such as neodymium (a rare earth element), lithium, indium and gallium are therefore also called “technology metals”. As technology progresses, new applications are found, thereby creating new supply and demand patterns, as demonstrated by the growth in renewables technology.

20

Of the 14 metals shown in Figure 1.7, which range from antimony and beryllium to titanium and zirconium, none was traded freely in 2009 and conditions deteriorated thereafter. By 2012, export restrictions had tightened for more than half the metals listed (germanium and other materials with semi-conductor properties, tungsten, cobalt, molybdenum, magnesium and tantalum). Exports from eight countries (Argentina, Bolivia, Brazil, China, India, the Russian Federation, South Africa, Viet Nam), several of which are major players in the world market, faced restraint. Four and three of the top 5 producers of antimony and tungsten, respectively, restricted their exports in 2012. This includes China, which is a leading world producer of 11 minor metals and which uses export taxes, export quotas, licensing requirements or some combination of these measures extensively across the minor metals sector.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2012

2011

2010

2009

Export prohibition Export quota Export tax Licensing requirement Minimum export price / price reference for exports Other export measures



The list of products shown here is not exhaustive and, depending on the source, can include other items. The Minor Metals Trade Association, for example, covers some 34 products, including certain precious metals (ruthenium, rhodium, osmium), and chemicals and compounds such as lithium and rare earth elements. Lithium and its compounds have traditionally been used in the production of ceramics, glass and aluminum but demand growth in recent years has come from lithium batteries and applications in cell phones and other portable consumer goods, as well as in hybrid and electric vehicles. The OECD Inventory shows one country, Argentina, collecting export taxes on lithium compounds. Argentina stands out among countries imposing export restrictions because the range and number of raw materials and other products that are taxed when exported is by far the largest. Across all countries in the Inventory, export taxes and non-automatic licensing requirements are easily the dominant types of export measures employed (Figure 1.8).

Figure 1.7. Count of measures restricting exports of non-ferrous minor metals (2009, 2012)

Note: A count of measures was made per HS6 product line. As 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. *Refers to germanium, vanadium, gallium, hafnium, indium, niobium and rhenium.


0 1 2 3 4 5 6 7

Antimony

Manganese

Germanium*

Tungsten

Cobalt

Molybdenum

Magnesium

Bismuth

Tantalum

Zirconium

Titanium

Beryllium

Cadmium

Chromium

2009 2012



Figure 1.8. Restrictions on non-ferrous minor metals in 2009-2012, by share of types of measure

Note: The minor metals are: antimony, beryllium, bismuth, chromium, cobalt, germanium, vanadium, gallium, hafnium, indium, niobium, magnesium, manganese, molybdenum. Titanium, tungsten, zirconium. Based on counts adjusted for the number of lines per product. Based on counts adjusted for the number of lines per product. No export prohibitions were reported for non-ferrous minor metals in 2009-2012.


Rare earth metals21

are other metallic elements critical for high-technology manufacturing, ranging from wind turbines and cell phones to defence applications. Although known deposits are more dispersed around the world, China has over the last decade come to occupy a near-monopoly position at all stages of the supply chain of rare earth materials (raw ores, oxides and alloys) with the result that many countries depend critically on this source. Economic growth and consumer demand have increased the needs of China’s own manufacturing industries for these metals, prompting the government to restrict the outflow of domestic production. Export quotas have been introduced and successively tightened. In 2009, allocations were cut by 40%, followed by a further reduction in 2010. Export duties were increased for all rare earth elements. These actions, by raising export prices and placing non-Chinese downstream manufacturers at a competitive disadvantage, caused friction with trading partners and provoked concern about reliability of supply. Since then, tight supply and high prices have prompted companies around the world to restart or initiate mining and processing operations for some of the rare earth elements outside China (e.g. in Australia, United States).

Other industrial raw materials

Precious metals and stones, and wood, are other sectors affected by export restrictions. In the case of gold and other precious metals, restrictions are mostly applied to already processed products, whereas restrictions affect diamonds only when traded in their raw form. In total, 13 countries applied restrictions in 2012, including three major producers (China for silver, and the Russian Federation and South Africa for diamonds and precious metals).

Eleven of the 21 countries surveyed by the OECD Inventory for wood products applied restrictions. These consisted mostly of non-automatic licensing requirements but also outright export bans, applied to industrial roundwood (i.e. logs) and/or sawnwood and veneer. All the countries surveyed are leading world producers of the respective categories of roundwood and semi-processed products of interest (sawnwood, plywood, veneer). With the exception of Indonesia, which expanded the range of wood products subject to export controls, the governments of the countries surveyed did not change their policies between 2009 and 2012.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2012

2011

2010

2009

Export quota Export tax Licensing requirement Minimum export price / price reference for exports Other export measures



Agricultural and food products: Rice and wheat22

Agro-food products are produced and consumed throughout the world, but many countries do not produce enough to feed their populations due to climatic and other resource constraints. Rice and wheat are crucial for human survival, providing many of the calories consumed in the developing world while also being among the key targeted commodities for export restrictions. About 89 countries produce rice and 75 countries produce wheat, whereas rice is a staple food in 116 countries and wheat, in 119 countries. Countries that either do not produce them at all, or do not produce enough at competitive prices, rely on the international market to satisfy domestic needs.

(a) Rice

More countries applied a larger variety of export restrictions for rice between 2007 and 2008 than in the other years covered by the inventory. During this period, eight (Argentina, China, Egypt, India, Indonesia, Myanmar, Pakistan and Viet Nam) of the 16 countries had export restrictions in place. Four countries (Argentina, China, Egypt and Viet Nam) taxed rice exports and four (Egypt, India, Myanmar, and Viet Nam) banned them. Three of the four countries imposing export bans had other measures in effect as well. Licensing requirements and minimum export price provisions were also in force. By 2010, five countries still had active export restrictions. Egypt and India imposed quotas and bans, while Argentina continued to impose export taxes on agricultural commodities. Viet Nam maintained its minimum export price policy, first introduced in 2008, while China and Indonesia continued their export license requirement. In 2011, only four countries were actively restricting their rice exports. Argentina continued its export tax, Egypt its export ban and China its export license while Myanmar introduced an export ban.

Export supply of rice is highly concentrated. In 2008, 35 countries exported some of their production but the top five exporters provided 78% of the total and the leading ten exporters supplied 92% of the market. Three of the eight countries restricting their rice exports in 2008 (Viet Nam, Pakistan and India) were among the top five exporters and two more (Myanmar and China) were among the top ten leading exporters (Box 1.3). Total rice exports in 2008 fell below the 2007 level by some 2.5 million tons.

It is not clear, however, that the entire shortfall in exports relative to 2007 was a result of the export restrictions. The largest rice exporter in 2008, Thailand, did not adopt export restrictive policies, yet its exports were 1.4 million tons below 2007 levels, while exports from Viet Nam, the second leading exporter and Myanmar, the sixth largest exporter, both with export restrictive measures, were some 1.3 million tons and 500 thousand tons, respectively, higher than in 2007. Exports from India, the fifth largest exporter, contributed the most to the export shortfall with exports almost 2.6 million tons below 2007 levels.

Box 1.3. Export measures in the rice markets in 2008

In 2008, a total of eight countries imposed measures to restrain their rice exports, with China, Egypt, Indonesia, the Republic of the Union of Myanmar and Pakistan joining three countries (Argentina, India and Viet Nam) that imposed restrictions in 2007. Argentina continued imposing a 10% export tax and India continued banning exports conditional on a minimum export price, but exempting some countries with country-specific quotas. China imposed an export tax of 5% while Viet Nam changed the export ban initiated in July 2007 to, initially an export quota of 4.5 million tons and a minimum export price which was later switched to a variable export tax from USD 30/ton to USD 175/ton, depending upon the free on board (fob) price. Egypt initially imposed an export tax of Egyptian pounds 300/ton but subsequently banned all exports, while in Pakistan’s case, a minimum export price ranging from USD 750/ton to USD 1 500/ton depending on the variety was established. In May 2008, Myanmar temporarily banned exports of rice until November of 2008. Indonesia, although a large net importer, imposed licensing requirements on exporters.



(b) Wheat

2008 saw a higher incidence of export restrictions also for wheat (Box 1.4). In 2008, 61 countries supplied surplus wheat to the international market. However, as is the case for rice, the international wheat market is highly concentrated, with the top five exporting countries supplying 73% of the world’s import demand, and the ten leading exporters providing 94% of the total. Eight countries imposed export restrictions on wheat. Of these five (Argentina, Kazakhstan, Pakistan, the Russian Federation and Ukraine) were among the ten leading exporters in 2008 while China dropped out of the top ten in 2008 as exports were 2.1 million tons below 2007 level. Exports were below 2007 levels also in Argentina (4.4 million tons) and Kazakhstan (1.8 million tons). But exports from the Russian Federation (5.8 million tons) and Ukraine (11.8 million tons) were above 2007 levels. Overall then, despite a higher incidence of restrictions in 2008 compared to 2007, total exports in 2008 were still more than 27 million tons above 2007 levels.

The main instruments that countries used to restrict wheat exports during the period 2007-2011 were export taxes, quotas and outright bans. In 2008, the year with the highest number of recorded restrictions, eight countries imposed either an export tax or banned exports altogether. China and Argentina applied quota restrictions to exports on certain wheat products. The situation relaxed in 2009 but then deteriorated again in 2010. While in 2009 existing export prohibitions were discontinued and no new bans were introduced, three countries – India, Pakistan and the Russian Federation – resorted to these measures in 2010. Pakistan and Ukraine applied export quotas, and wheat exports from Egypt could only leave from a single port. In 2010, the only country that used export taxes was Argentina.

Box 1.4. Export restrictive measures in the wheat markets in 2008

Eight countries imposed various restrictions on their wheat exports in 2008. India continued its export ban initiated in 2007. Wheat exports were also banned by Kazakhstan, Pakistan and the Russian Federation. Argentina changed its export tax to a variable rate based on government-issued formulae. This was later revised to a fixed rate of 23% or 28% depending on the variety. An export quota of 4.4 million tons was also fixed. China set an export tax of 20%, while the Kyrgyz Republic, albeit a net wheat importer, set an export tax of local currency (soms) 15/kg and Ukraine continued the 3 million ton export quota initiated in 2007. Most of these policies were relatively short term. By 2009, only three countries still had export restrictions for wheat. China first lowered its export tax to 3% and then eliminated it, replacing it by an export license requirement. India replaced its export ban with an export quota of 900 thousand tons with an additional 300 thousand tons allocated to three specific firms, and Argentina continued its export tax and export license requirement.

1.5. The policy context of export restrictions

Why do governments use export restrictions?

When governments restrict exports, they have specific policy objectives in mind. Although not all governments publicly articulate the reason for their actions and the OECD Inventory has gaps in its records, the information available there shows that the justifications offered are very diverse. This holds especially for the measures affecting industrial raw materials.

Whatever the rationale given, it does not appear to depend on the type of mineral. At the same time, the reasons given for restricting the same mineral can vary widely over countries. Agricultural commodities are different: food security and the fight against inflation are very frequently cited policy objectives and are specific to export restrictions in this sector.

As might be expected, a prime motive cited by countries for the use of export taxes is their capacity to generate revenue. But export taxes are at times also justified as being essential to conserve natural resources or to promote downstream processing or value-adding at home. Non-automatic licensing requirements have the widest range of cited objectives, with control of illegal export activity and promotion or protection of local processing/value addition heading the list.



A high proportion of the exports of developing countries are concentrated in primary, unprocessed commodities. These countries want to add more value to production and export. Advancing to higher stages of processing is advantageous because prices of processed products usually are higher and do not fluctuate as much as primary commodities, processed products can be used locally as well as exported, the local workforce acquires new skills and more links are created with other sectors of the economy.

23 As Table 1.7 shows, export restrictions are often

intended to promote processing and value addition at home or reserve domestic supply (including food supplies) for local consumption. However, precisely because export restrictions lower the domestic price relative to the world market price and act as an indirect subsidy for downstream industries, they have been criticised for artificially protecting domestic raw material-using industries against foreign competition.

24 Whether downstream industries actually become successful players

in the domestic or global marketplace because of export restrictions is a matter of empirical study.

Some governments justify export taxes by their need to generate revenue. For developing countries, and the least-developed countries in particular, it is often easier to raise revenue by collecting a tax at the border than through income and other taxes (Piermartini, 2004, p.14). For some cases where government revenue is one of the stated reasons for export taxes, Table 1.8 shows information about user countries’ income, how much the taxes collected on exports actually contribute to total tax revenue and how much taxes on exports and imports combined contribute to central government revenues. In a few countries export taxes appear to have earned very little for the government. Evidence across countries also shows that tax rates are unrelated to income level: the poorest countries do not levy the highest rates.

Other reasons that are evoked less often for the use of export restrictions on metals, minerals or wood are the aim to conserve natural resources, to protect human health or the natural environment. In such cases, the measure mostly takes the form of non-automatic licensing requirements.

With respect to metal waste and scrap, rising scrap prices over the last decade have caused rampant theft and smuggling, including across borders. Global demand for secondary material has also risen sharply, driven by steelmaking, which increasingly relies on scrap material. In many cases where governments took steps to regulate the export activities in this sector, the stated objective was to prevent theft and sales abroad of material that has been acquired illegally or to ensure availability of secondary material for local user industries.

The information available for export restrictions applied to agricultural commodities shows that some of the reasons for adopting these measures coincide with those provided for raw materials, with some countries giving the same rationale for restrictions on both (see Table 1.7). However, as agricultural goods are essential for human survival, some countries cited the need to ensure food security for their population. Domestic price stability and curbing food price inflation during periods of rising international prices are also cited for this sector only. Food expenditure in developing and low-income countries takes a large share of household income and rising prices create social and political pressures. Hence, concerns about supply and price stability, food price inflation and food security were the most frequent rationales governments cited for restrictive action(s), where this information was available.

Motives given for export restrictions do not differ markedly according to the processing stage of the product, although promotion of domestic value addition and natural resource conservation seem to motivate export restrictions for semi-processed goods somewhat more than for primary commodities.



Table 1.7. Justifications for export restrictions

Control foreign exchange Protect local industry

Philippines Kazakhstan

Ukraine Malaysia

Viet Nam Rwanda

Generate revenue Promote or protect further processing/value added

Argentina Argentina

Azerbaijan India

Belarus Indonesia

Benin South Africa

Namibia Zambia

Philippines Zimbabwe

Sierra Leone Production considered strategic for the economy

Syria Mauritius

Ukraine Food security*

Conserve natural resources Indonesia*

Australia** Kyrgyz Republic*

China* Ukraine*

Ghana** Viet Nam*

India Safeguard domestic supply

Indonesia Argentina*

Thailand Canada**

United States ** Egypt*

Protect health and/or the environment Former Yugoslav Republic of Macedonia*

China India

India Malaysia

Indonesia Republic of Moldova*

South Africa Republic of the Union of Myanmar*

Malaysia Nigeria**

Fight inflation and stabilise domestic prices* Paraguay

Argentina* South Africa

Egypt* Thailand

Republic of the Union of Myanmar* Uruguay

Monitor / control export activity Viet Nam

Afghanistan Other***

Argentina Brazil

China China

Fiji India

Ghana Tajikistan

Indonesia

Philippines

Ukraine

Viet Nam

Note: Industrial raw materials: Restrictions on exports of metal waste and scrap are not taken into account. * The measure relates to agricultural commodity exports. ** The measure relates only to wood products. ***Other = e.g. reduce congestion, chemical that directly or indirectly may be designated to elaborate illicit narcotics, psychotropics or cause physical dependence, public interest not further defined, implementation of the 2006 Softwood Lumber Agreement between Canada and the United States, national security. Measures recorded as having been eliminated during 2009-12 for industrial raw materials, and during 2007-11 for agricultural commodities, are included.




Table 1.8. Export taxes and government revenue

Country Level of income†

Export tax/surtax/ fiscal tax‡

% of tax revenue generated by

export taxes* (2012)

% of total government revenue generated by taxes on exports and imports **(2012)

Afghanistan 1 5-15% 0.2 4.2

Argentina 3 5-40% 15.3 15.8***

Azerbaijan 3 1-2.75% n.a. 2.6

Belarus 3 50-85 EUR/ton 13.7 16

Benin 1 3% 0.1 23.4

Namibia 3 10% n.a. 14.8****

Sierra Leone 1 5-15% n.a. 9.5

Tunisia 3 90-270 TND/ton 0.1 5.9

Ukraine 2 27% 0.1 2.5

Notes: †Level of income refers to World Bank income classification as of 1 July 2013, by GNI per capita (https://wdronline.worldbank.org/worldbank/a/incomelevel). 1 = low income economies, 2= lower middle-income economies; 3 = upper middle-income economies. ‡The tax rates shown are for products surveyed by the OECD Inventory; the government may collect taxes also on exports of other products. * Taxes on exports - all levies on goods being transported out of the country or services being delivered to non-residents by residents. ** Refers to taxes on international trade, including import duties, export duties, profits of export or import monopolies, exchange profits and exchange taxes; *** Data is for 2004; **** Data is for 2011.

Sources: World Bank, World Development Indicators, as of August 2014.

Factors determining the effect of export restrictions

Export restrictions unequivocally affect countries that import from the restricting country negatively and can have significant costs also for the restricting country. The impact depends on several factors. When the restricting country is a small export supplier, the action does not affect the commodity’s price or world market supply. When individual large exporters or several producers with joint market power resort to these measures, supply on the world market falls and world market price rises. The production costs of countries sourcing their material needs abroad, and ultimately the price paid by the consumers of finished products made in these countries, rise. Chapter 2 provides a detailed analysis of the economic effects of export restrictions under different assumptions.

Measures taken by large producers capable of influencing world supply

When one or several countries that either individually or jointly command a large share of traded output impose export restrictions, foreign consumers have few alternative supply sources and will have to compete for a lower quantity of higher priced supply available on the world market. An often cited case concerns rare earth metals, overwhelmingly controlled by China. When the Chinese government decreased export quotas and increased export taxes on rare earth materials, their price on world markets skyrocketed, trading partners protested and a formal complaint against China was filed at the WTO. Another mineral where export restrictions affect a large share of global production is tungsten, where China, again, leads world production, followed at some distance by the Russian Federation, Canada and Bolivia. Jointly accounting for 91 % of world production of tungsten ores and concentrates in 2012 (some 75,000 tons), China, the Russian Federation and Bolivia all have restrictions in place on mined and semi-processed tungsten, as do other countries with very limited or no known tungsten production facilities (Dominican Republic, Grenada, Malaysia, Philippines, South Africa and Viet Nam). In 2012, the restrictions of all these countries combined affected well over 50% of world exports totalling USD 1.7 billion. Antimony is yet another mineral where three producers (Bolivia, China and the Russian Federation) together control about 90% of world production; all three had export restraints in place in 2012. With China alone accounting for half of world antimony exports in 2012 and the Russian Federation and Bolivia jointly for another 12%, their actions affected 62% of global trade of primary mined and semi-processed antimony.



Table 1.9. Share of world production and exports of major producer countries with restrictions in place in 2012

Product Restricting

country/countries Share of world

production Share of world

exports

% %

Products restricted by one of the top 5 producers in the world

Garnet India 48 46

Magnesite China 65 44

Rare earths* (oxides) China 91 41

Vanadium China 53 36

Vermiculite China ^22 26

Fluorspar China 62 24

Nickel Russia 14 16

Sulphur Russia 10 14

Phosphates China 44 13

Molybdenum China 42 10

Wheat Russia 6 9

Titanium China (ilmenite) 10 8

Maize Ukraine 2 7

Zirconium China 2 4

Products restricted by two of the top 5 producers in the world

Graphite China, India 92 66

Barytes China, India 63 62

Talc China, India 44 43

Chromium India, South Africa 56 40

Alumina + Aluminium China, Russia 46 23

Barley Russia, Ukraine 12 22

Cobalt China, Russia 7 20

Coke China, Russia n.a. 20

Rye Russia, Ukraine 12 19

Products restricted by 3 or more of the top 5 producers in the world

Magnesium Brazil, China, Russia 92 68

Antimony Bolivia, China, Russia 90 62

Industrial roundwood (coniferous) Canada, Russia, United States 46 57

Tungsten Bolivia, China, Russia 91 42

Industrial roundwood (non-coniferous, tropical) Indonesia, India, Malaysia 47 32

Industrial roundwood (non-coniferous, non-tropical) Australia, Canada, United States 48 28

Manganese China, India, Gabon 36 ^^13

Note: Products are shown ranked by share of world exports (last column). The table reflects the situation of 2012 for industrial raw materials and 2011 for primary bulk commodities. With the exception of rare earth oxides, vanadium, alumina and aluminium and a few other metals, production data for minerals are for ores and concentrates. Export data include unprocessed and semi-processed materials. A few products, such as mica, tantalum and coking coal, are omitted because of missing or highly unreliable production or trade statistics. * In 2009 only three countries were found to produce this product, and those three countries are surveyed by the Inventory for export restrictions. A country may produce only a small amount of a product but still rank among the global top 5 producers, or it may account for a much higher share of world exports than its share in global production. For methodological issues related to the OECD datasets, the agricultural commodities listed may not be exhaustive. ^ Figure is for 2011. ^^ Export data not available for Gabon. n.a - Not available.

Sources: OECD Inventory, as of June 2014; US Geological Survey; British Geological Survey. For agricultural products – FAOSTAT. For wood – FAO (2014); ITTO, Annual Review Statistics Database; UN Comtrade.



Table 1.9 identifies other cases where countries from among the top five producers and using export restrictions in 2012 were large exporters. Their share of global export supply is high in the presence of restrictions and would probably be higher without them. The actions of these countries must have had a discernible effect on world supply and prices. Three countries (China, India and the Russian Federation) stand out in the list because they occur so often. Across all 29 products or product groups shown, China has the most restrictions (18 products). The second most often represented country is the Russian Federation (12 products), and then India (7 products). Other major producers with export restrictions were Bolivia, Brazil, Gabon, South Africa and Ukraine for certain minerals and bulk agricultural commodities and Australia, Canada, Indonesia, Malaysia and United States for wood.

Some measure of the restrictiveness of export taxes

This section focuses on taxes, because the effects of other measures are either self-evident (by definition, export prohibitions ban exports), hard to assess from the data in the OECD Inventory (export licensing requirements and their administration are most often not explained) or the measure is little used (export quotas were used only by China for minerals, metals, waste and scrap, and only by Ukraine and Argentina for certain agricultural bulk commodities).

Export taxes (including fiscal taxes and surtaxes) account for one third of export restrictions on raw materials in 2012 and 16% of restrictions on agriculture products in 2011. In 2012, 86% of the export taxes on minerals and metals were in ad valorem terms. In contrast, three countries imposed export taxes on agricultural products in 2011, the last year for which OECD Inventory data are available, of which only 45% were ad valorem taxes, 29% were specific tax rates, the rest being a mix of the two.

Ad valorem export tax data for industrial raw materials available in the OECD Inventory were examined in order to gauge the heights of the tax walls, which determine the trade effect.

The range and average tax rates for individual products are shown in Figure 1.9. Between 2009 and 2012, less than 3% of ad valorem taxes on metals and minerals were so-called “nuisance” taxes, a term that has been used to refer to (generally import) tariffs of 3% or less that are considered more difficult to implement and collect than actually distorting.

25 Likewise, all

ad valorem export tax rates on agriculture products (not shown) exceed this level in the same period. This means that most of these taxes are expected to raise the export prices of the affected products enough to discourage or even prevent overseas sales.

Export taxes are high also in comparison with import tariffs on industrial raw materials, which averaged 3.2% in 2012 and their processed products, which faced an average import tariff of 4.6%.

26 The average ad valorem export tax for minerals and metals was 10.9 % in 2012.

Unprocessed products had a trade-weighted average tax rate of 8.6% compared to 11.8% of semi-processed items. At the product level, the relationship holds for certain products. For iron and steel, for example, the average tax rate of iron ore (12.8%) is lower than that of semi-processed iron and steel (15.1%). However, for others, antimony, cobalt and copper for example, the higher average tax rate is on the unprocessed form.

By contrast, the maximum tax rates were consistently higher for raw metals and minerals than for the same materials after some processing. For example, the highest tax rate of unprocessed antimony, cobalt, copper and zinc were 20%, 20%, 30%, and 20%, respectively, but in a semi-processed form these same metals had maximum rates of 12.5%, 10%, 21%, and 15%, respectively.

Exports of waste and scrap products also are taxed at trade-distorting levels (not shown here). Compared to minerals and metals, export taxes on waste and scrap have less variation, both in terms of the range as well as the average tax rate applicable. The average export tax rates for waste and scrap products was around 11%, with aluminium and copper scrap each having the widest ranges, of 5%-50%.



Figure 1.9. Rates of export taxes for select minerals and metals

a. 2012 Export taxes for unprocessed minerals and metals

b. 2012 Export taxes for semi- processed minerals and metals

Note: Numbers in brackets next to the product name are the count of restrictions within each category. Restrictions are counted at the HS6 level. Average export tax rates includes only ad valorem tariffs and are weighted using the average gross export trade from 2010-2012. If a country or product did not have trade data, the OECD average was used. The figure does not include fiscal or export surtax. Export taxes not in force for the entire year were also weighted by the number of days in effect. Only export taxes greater than 0 are included in the averages.

* Gold” includes gold, platinum, iridium, osmium, palladium, rhodium, and ruthenium.

** “Niobium” includes niobium, tantalum, and vanadium.

*** Iridium, osmium, ruthenium.

Source: OECD Inventory of Restrictions on Exports of Raw Materials, UN Comtrade.

Range Weighted Average

0

5

10

15

20

25

30

35

40

45

0

5

10

15

20

25

30



The bandwagon phenomenon

Export measures may promise benefits to the downstream industry. However, this would appear to have a chance only if a given restriction is imposed without evoking similar policies in other countries. Experience shows that export controls can trigger similar actions in other supplier countries, driving up prices further, making price volatility worse, and creating a crisis of confidence that spreads from one resource to the next. Examples of markets where “snowball-like” rounds of increasingly tighter export restrictions choking global trade flows appear to have occurred in recent year are:

In 2010, in addition to restrictive export policies for copper waste and scrap already being in place in China, India and Viet Nam (the only country adjusting export barriers downward - by cutting its export tax from 37% to 33% that year), several other countries moved to discourage or prevent shipments of this product abroad. In January, Belarus reportedly introduced an export quota for copper scrap alongside an export licencing requirement for copper-containing ash and residues. In April, Guyana banned export of copper scrap and, three months later, Kenya, Rwanda, Tanzania and Uganda took the same action. Finally, Afghanistan imposed a tax on exports of copper scrap in July 2010.

In 2008, China introduced an export tax of 5%, Egypt introduced a specific export tax of 300 Egyptian pounds per ton but subsequently banned all exports, India imposed an export ban (conditional on a minimum export price and country-specific quotas), Myanmar imposed an export ban, Indonesia required export licenses, Pakistan imposed a minimum export price and Viet Nam imposed a minimum export price coupled with an export quota which was subsequently replaced by a variable export tax ranging from USD 30/ton to USD 175/ton, depending on the FOB price.

In 2008, Argentina imposed a variable export tax on wheat, which was later converted to either 28% or 23%, depending on the wheat variety, as well as an export quota. Ukraine also imposed an export quota, while China and the Kyrgyz Republic imposed export taxes of 20% and 15 Kyrgyzstani som per kg, respectively. Export bans were imposed by India, Kazakhstan, Pakistan and Russian Federation.

While RTAs, especially those concluded more recently, have made headway in circumscribing the use of export restrictions, this is not always the case. RTAs can create momentum leading in the opposite direction, when one member manages to persuade its other RTA partners to join forces and adopt a common restrictive stance. This appears to have happened in 2010 when all five members of the East African Community moved to ban shipments of many types of metal scrap destined for third markets.

Practices adding to uncertainty in markets

Lack of transparency in the use of export restrictions, evidenced by the relative paucity of information published on governmental websites and the fact that not all measures are notified to the WTO, is one factor creating uncertainty for markets and trading partners. Another factor is specific to export restrictions in the agro-food sector: most of the restrictions recorded between 2007 and 2011 were temporary, with many lasting less than a year. These measures create market confusion and uncertainty because they were often announced suddenly with no clear indication of how long they would last.

Ad hoc policy changes also render the business environment uncertain. The OECD Inventory shows that governments sometimes adjust their export policies from one year to the next and that, in some cases, this occurs within an even shorter period of time.



For example:

India adjusted its distance-based charge for iron ore transport (intended for other than domestic consumption) four times in 2010 and at somewhat longer time intervals in the following years.

China repeatedly tightened its regime of export quotas over the years and reportedly not always with advance notice to trading partners. For coke, where China is the world’s largest producer, export quotas were tightened starting in 2004 and this process continued over the course of subsequent years. For example, allocations of 12 million tons in place in 2008 were cut in 2009 to 11,910,000 metric tons, then reduced further, to 9,000,913 tons in 2010 and to 8,419,249 tons in 2011. Along with the export quota, China introduced an export tax on coke in 2006, which it subsequently also raised several times.

27

At the beginning of 2009, Indonesian exporters of furnishing material consisting of varieties of rattan had to pay a 15% or 20% export tax, depending on the variety, which the government replaced in July 2009 by export quotas whose allocation varied according to the type of rattan. These quotas were subsequently replaced by an export ban, which in turn was replaced in December 2009 by export taxes.

In March 2008, Egypt imposed a specific export tax of Egyptian pounds 300/t on the exportation of various rice varieties. In April, the tax was replaced by a ban, scheduled to expire in October but then extended to April 2009. In July 2009, this ban was replaced by an export tax of Egyptian pound 2 000/t, which was replaced by another ban in October 2009. Although the ban was scheduled to end in October 2010, in January 2010 the authorities opened an export quota. Another quota followed in September but in the same month another export ban was decreed, scheduled to expire in October 2011.

Preferential arrangements and other exemptions

Distortions are introduced in international trade when countries apply trade policies in a discriminatory manner. When governments apply export restrictions, do they observe the WTO’s fundamental principles of non-discrimination?

From the limited information available in the OECD Inventory, export restrictions are not always applied even-handedly. There are two kinds of preferential approach. Sometimes governments exempt or apply special rules for specific firms or types of market actors, such as state enterprises. The other approach involves granting exemptions from export restrictions to certain trading partners, such as other parties belonging to a shared regional trade agreement (RTA). The Russian Federation reportedly does not apply restrictions to Belarus and Kazakhstan, with which it shares a custom union. Similarly, members of the Eurasian Economic Community are reported to be exempted from Kazakhstan’s export restrictions for aluminium, copper, iron and steel. Trade between members of the West African Economic and Monetary Union (UEMOA) is excluded from (unverified) export restrictions that the Inventory reports for Senegal.

Exemptions from export restrictions or differential treatment of trading partners appear to be more common for agricultural products. When India banned rice exports in 2008, the Russian Federation and the Maldives were exempted and country-specific quotas were allocated to Madagascar, Comoros, Mauritius, Sierra Leone and Bangladesh. Similarly, an export ban for dried beans and other products in 2008 excluded the Maldives, and when Argentina banned wheat exports in 2007, up to 100,000 tons destined for Brazil were exempted. China too, in 2007, provided specific export quotas for various live animals destined for its autonomous regions of Hong Kong, China and Macao, China. Such differential treatment can compound the distortions that export restrictions introduce in the international market.

Today, the vast majority of countries belong to at least one regional trade agreement. Chapter 5 of this volume presents evidence on how over the last decade a number of regional and bilateral free-trade initiatives have explicitly included export restrictions on their negotiating agenda,



leading to some tightening of conditions on their use vis-à-vis other parties to these RTAs. Unfortunately, when governments notify or publish information about restrictions planned or in force, they seldom state whether and how their RTA participation affects their use of these measures. Hence, the OECD Inventory contains little information on this and cannot be used to verify how common the preferential practices described here are.

1.6. Conclusions

This chapter has provided evidence that export restrictions are widely used in some sectors and that usage has risen in recent years. Data collected by the OECD for many countries and many industrial and agricultural raw materials shows that from 2007 to 2012 various temporary and longer-term export restrictions have been applied to raw material products, which has undoubtedly affected a sizeable share of world export supply. The extent of the disruptions that can be inferred from the evidence presented on the use of restrictions is probably under-estimated because we only report ex post (i.e. with-restriction) export performance, and because the OECD Inventory dataset does not capture the whole universe of export restrictions. Because of the specific methodology used for collecting information for the OECD Inventory in the industrial raw materials sector, not all countries included in the survey are surveyed for each of the 80 different primary minerals, metals and wood products. As a result, the full scope of industrial raw materials subject to export restrictions in a country is not known. This is not the case for agricultural products, where the Inventory captures the policies of a more limited number of countries and only a subgroup of products was included in this chapter’s analysis.

This chapter has not tried to measure the economic impact of the measures reported. Instead, it prepares the ground for such work by documenting relevant features of measures and product markets, such as the degree of export concentration, the magnitude of export tax rates across products and the structure of taxes along the continuum from unprocessed to semi-processed raw materials. The chapter also discusses the diverse rationales stated by governments for their use of export restrictions. Some convergence can be seen among export tax-using countries around the objectives of revenue collection and promoting food security in the case of restrictions on agricultural exports, but the otherwise large differences between countries raise questions about whether export restrictions can be effective first-best or even second-best instruments for achieving such heterogeneous objectives.

Seen against the achievements of the rules-based multilateral trading system in lowering and controlling import barriers, the spread of export restrictions is a worrying development. Equally disconcerting is their lack of transparency, which the OECD Inventory is helping to remedy. As this chapter has demonstrated, there remain many gaps in our knowledge about the use of these instruments. Trade itself is inevitably affected by the measures, but it also matters how these measures are being applied. For example, little is known about the consistency and even-handedness with which government agencies administer export licenses. This is one of many aspects of export restrictions that merit further research.



Notes

1 Barbara Fliess is a Senior Trade Policy Analyst, Christine Arriola is a Statistician and Peter Liapis is a Senior Agricultural Policy Analyst in the OECD’s Trade and Agriculture Directorate. The authors would like to thank Jane Korinek and the Working Party of the OECD Trade Committee for very helpful comments on earlier versions of this chapter.

2. See for example US Department of Energy (2010), Commission of the European Communities (2008), Japan METI (2008), House of Commons, Science and Technology Committee (2011).

3. Unless otherwise stated, the import and export figures presented in this chapter do not include intra-EU trade. “Exports” include re-exports of a product. Similarly “imports” include re-imports.

4. For another empirical examination of how trade measures like export restrictions affected world markets, with a focus on the 2005-8 surges in world agricultural prices, see Martin and Anderson (2012).

5. In 2011, the United States, European Union and Mexico won a WTO case against China on its export quotas on nine industrial raw materials. China's appeal to the WTO appellate body was rejected, and it subsequently removed its export restrictions on these materials. A second case challenging China's use of export quotas and tariffs for rare earths, molybdenum and tungsten as an industrial policy tool consistent with WTO rules was brought against China in 2012. In August 2014 the WTO Appellate Body confirmed that China’s export restrictions on rare earth as well as tungsten and molybdenum were in breach of WTO rules.

6. Export restrictions are recorded at the HS6 level of product classification, along with qualitative information about the legal basis for the measure, introduction and ending dates (where applicable), the agency in charge, implementation procedures, and references with links to official sources of information about the measure. The Inventory and a methodological note explaining how the data were collected are available at: http://www.oecd.org/tad/benefitlib/export-restrictions-raw-materials.htm.

7. The industrial raw materials surveyed by the OECD Inventory and discussed in this Chapter comprise the following chapters of the Harmonised System (HS 2007): (1) Minerals and metals: ferrous metals (HS 72), non-ferrous metals (base metals HS 74-80, minor metals HS 81), metal ores and minerals HS 25-26, excl. 2620, chemicals and compounds HS28; (2) Metal waste and scrap HS 72-81, 2620, 252530; and (3) Wood consists of subheadings of HS 44. Primary (unprocessed) forms of materials refer to metal ores and minerals (HS codes from the chapters HS 25 and HS 26), semi-processed forms belong to HS chapters HS 71-72, HS 74-76, HS 78-81, except diamonds.

8. Chapter 4 of this volume provides more comprehensive analysis of the Inventory’s information on agricultural commodities.

9. Examples are the Basel Convention on the Control of Trans-boundary Movements of Hazardous Wastes and their Disposal, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and the Kimberley Process.

10. Primary bulk products (e.g. wheat and rice), horticultural products (e.g. fruit and vegetables), semi-processed products (e.g. vegetable oils) and processed products.

11. Intra-OECD trade includes trade between EU members that are part of the OECD.

12. This is a minimum value since the OECD Inventory is not an exhaustive survey of all producers and all products.

13. In compliance with the 2012 WTO rulings in China – Measures Related to the Exportation of Various Raw Materials (WT/DS394, WT/DS395, WT/DS398), the application of export duties to certain reforms of magnesium, as well as of bauxite, coke, fluorspar, manganese, silicon metal and zinc, and the export quotas for certain forms of bauxite, coke, fluorspar, silicon carbide and zinc, which were found inconsistent with the WTO rules by the Panel and the Appellate Body in these disputes, have been removed since January 2013. In August 2014, the WTO Appellate Body confirmed an earlier ruling that China’s export restrictions on rare earth, tungsten and molybdenum, were in breach of WTO rules.

14. US Geological Survey, Mineral Commodity Summaries, January 2013, p. 99.

15. US Geological Survey, Mineral Commodity Summaries, January 2013 p. 123.

16. Azerbaijan Egypt, Kuwait and Trinidad and Tobago are excluded from the count because for these countries the OECD Inventory does not have data available for the years 2009 and 2012.

http://www.oecd.org/tad/benefitlib/export-restrictions-raw-materials.htm



17. When total Chinese exports of goods slowed down and then fell in 2008 and 2009 as a result of the global financial crisis, China reacted by initially raising VAT rebate rates for many goods, including certain steel products and semi-finished materials from minerals and metals, giving exporters higher rebates as an incentives to supply export markets rather than domestic markets. See Evenett et al. (2012).

18. 2011 consumption figures are from the Bureau of International Recycling, 2011, production figures are from the Japan Ferrous Raw Materials Association.

19. According to UN Comtrade statistics, the Russian Federation’s exports of ferrous scrap declined from 12 million tons in 2004 to just over 4 million in 2012.

20. This paragraph draws on information provided by the Minor Metals Trade Association. See http://www.mmta.co.uk/minor-metals.

21. “Rare earth metals” is a group of 17 chemically similar metallic elements: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium and yttrium.

22. Trade information is based on United States Department of Agriculture, Foreign Agricultural Service’s Production, Supply, and Distribution (PS&D) database. The PS&D database contains information on important exporters, like Myanmar, not covered by UN Comtrade.

23. See Economic Commission for Africa (2004), Minerals cluster policy study in Africa: Pilot studies of South Africa and Mozambique, 2004, especially p. 29; Natural Resources Canada (1999).

24. For example, the low cost of products such as coke has been criticised for providing a cost advantage to Chinese steel industry (see OECD, 2013).

25. See WTO Glossary. http://www.wto.org/english/thewto_e/glossary_e/nuisance_tariff_e.htm.

26. These figures are trade weighted averages for import tariffs>0 and were calculated based on import tariff data in the TRAINS database.

27. For more details about these measures, see Price and Nance (2010), p. 89-90.

http://www.mmta.co.uk/minor-metals

http://www.wto.org/english/thewto_e/glossary_e/nuisance_tariff_e.htm



References

American Scrap Coalition (2008), Raw deal: How governmental trade barriers and subsidies are distorting global trade in raw materials. Prepared by Wiley Rein LLP, Washington, D.C., November 2008

Areddy, J.T. (2011), “China tightens its grip on rare earth”, The Wall Street Journal, 8 February 2011.

Bonarriva, J., M. Koscielski and E. Wilson (2009), Export controls: An overview of their use, economic effects, and treatment in the global trading system, Office of Industries Working Paper No. ID-23, US International Trade Commission, August 2009.

British Geological Survey (2014), World Minerals Production 2008-2012, London.

Bureau of International Recycling (2011). http://www.bir.org/.

Commission of the European Communities (2008), The Raw materials Initiative—Meeting our Critical Needs for Growth and Jobs in Europe, Communication from the Commission to the European Parliament and the Council, Brussels.

Economic Commission for Africa (2004), Minerals cluster policy study in Africa: Pilot studies of South Africa and Mozambique, 2004.

Evenett, S.J., J. Fritz and Y.C. Jing (2012), “Beyond dollar exchange rate targeting: China’s crisis-era export management regime”, Oxford Review of Economic Policy, 28(2), p. 284-300.

FAO, FAOSTAT, Rome, http://faostat.fao.org/.

FAO (2011), Food prices – From crisis to stability, 16 October, FAO, Rome.

FAO (2014), Yearbook of Forest Products 2008-2012, FAO, Rome.

Goode, W. (1998), A Dictionary of Trade Policy Terms, Centre for International Economic Studies, University of Adelaide.

Hamilton, G. (2008), “Russian export tax opens log markets for local”, Vancouver Sun, 2 May.

House of Commons, Science and Technology Committee (2011), Strategically important metals, Fifth report of session 2012-2, HC 726, 17 May, London.

ITTO (2012), Annual Review and Assessment of the World Timber Situation 2012, http://www.itto.int/annual_review/.

ITTO, Annual Review Statistics Database (updated 2014/06/30), http://www.itto.int/annual_review_output/.

Japan METI (2008), Guidelines for Securing National Resources (provisional translation), Tokyo www.meti.go.jp/english/newtopics/data/pdf/080328Guidelines.pdf. The original text in Japanese is available at http://www.mofa.go.jp/mofaj/gaiko/energy/shishin.html.

Kim, J. (2010), "Recent Trends in Export Restrictions", OECD Trade Policy Papers, No. 101, OECD Publishing, Paris, http://dx.doi.org/10.1787/5kmbjx63sl27-en.

Martin, W. and K. Anderson (2012), Export restrictions and price insulation during commodity price boom, American Journal of Agricultural Economics, Vol. 94(2), p. 422-427.

Mitra, S. and T. Josling (2009), Agricultural export restrictions: Welfare implications and trade disciplines, International Policy Council Position Paper, Agricultural and Rural Development Policy Series, January.

Natural Resources Canada, From Mineral Resources to Manufactured Products: Toward a Value-Added Mineral and Metal Strategy for Canada, Ottawa, 1999, http://publications.gc.ca/pub?id=87321&sl=0.

http://www.bir.org/

http://www.itto.int/annual_review/

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https://webmail.oecd.org/OWA/redir.aspx?C=RoJ_NPytB0iQWuXij-NQKtWJi5i5mNEIZsHB4NuDtzrwETIQlaYZtiDZ0GTchwVPvfnWEQsEQBs.&URL=http%3a%2f%2fwww.mofa.go.jp%2fmofaj%2fgaiko%2fenergy%2fshishin.html

http://dx.doi.org/10.1787/5kmbjx63sl27-en

http://publications.gc.ca/pub?id=87321&sl=0



OECD (2014a), Inventory of Restrictions on Exports of Raw Materials.

http://www.oecd.org/tad/ntm/name,227284,en.htm. As of 14 June 2014.

OECD (2014b), Export restrictions of steelmaking raw materials: Examining changes in the stance of policy since 2009. DSTI/SU/SC(2014)7, 2014, Paris.

OECD (2013), Sources of trade friction in global steel markets: Selected issues for consideration

DSTI/SU/SC(2013)3, 25 June 2013.

OECD (2003), Analysis of non-tariff measures: The case of export restrictions [TAD/TC/WP(2003)7/FINAL], 4 April.

Piermartini, R. (2004), The role of export taxes in the field of primary commodities, World Trade

Organisation, Geneva.

Price, A.H. and D.S. Nance (2010), Export barriers and the steel industry, in The Economic Impact of Export Restrictions on Raw Materials, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264096448-en

Silberglitt, R., J.T. Bartis, B.G. Chow, D.L. An, K. Brady (2013), Critical materials. Present danger to U.S. manufacturing. Prepared for the National Intelligence Council. Rand Corporation. http://www.rand.org/content/dam/rand/pubs/research_reports/RR100/RR133/RAND_RR133.pdf.

Smith, Herbert (2009), Export restrictions on raw materials, WTO rules and remedies, December

2009, [mimeo].

United Nations Economic Commission for Europe, Forestry Department, Forest product statistics 2007-2011, http://www.unece.org/forests/fpm/forestproducts.html.

US Department of Agriculture, Foreign Agriculture Service, Production, Supply and Distribution, on line http://apps.fas.usda.gov/psdonline/psdQuery.aspx

US Department of Energy (2010), Critical Materials Strategy, December, Washington, D.C.

US Geological Survey (2013), Mineral Commodity Summaries, January 2013.

US Geological Survey (2012), Minerals Yearbook 2012.

World Bank, World Development Indicators, Taxes on international trade (% of revenue) and Taxes on exports (% of tax revenue), as of August 2014. Accessible at World DataBank, http://databank.worldbank.org/data/views/reports/tableview.aspx.

World Bank income classification as of 1 July 2013, by GNI per capita https://wdronline.worldbank.org/worldbank/a/incomelevel

World Steel Association (Worldsteel) (2013), Steel Statistical Yearbook 2013, Brussels https://www.worldsteel.org/dms/internetDocumentList/statistics-archive/yearbook-archive/Steel-Statistical-Yearbook-2013/document/Steel-Statistical-Yearbook-2012.pdf

http://www.oecd.org/tad/ntm/name,227284,en.htm

http://dx.doi.org/10.1787/9789264096448-en

http://www.rand.org/content/dam/rand/pubs/research_reports/RR100/RR133/RAND_RR133.pdf

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http://apps.fas.usda.gov/psdonline/psdQuery.aspx

http://databank.worldbank.org/data/views/reports/tableview.aspx

https://wdronline.worldbank.org/worldbank/a/incomelevel

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https://www.worldsteel.org/dms/internetDocumentList/statistics-archive/yearbook-archive/Steel-Statistical-Yearbook-2013/document/Steel-Statistical-Yearbook-2012.pdf

38 – RECENT DEVELOPMENTS IN THE USE OF EXPORT RESTRICTIONS IN RAW MATERIALS TRADE


Annex 1.A.

Multilateral rules on export restrictions1

Export duties, taxes or other charges are not prohibited under WTO rules. Article II of the GATT on Schedules of Concessions deals with import duties and charges in connection with importation only. No mention is made of export duties and charges. Unlike import duties or tariffs, they are generally not bound and hence members can adjust them unilaterally. For new members, however, the WTO accession process may impose disciplines on export taxes (and other types of export restrictions), as was the case for China, Viet Nam and the Russian Federation. For example, in its accession agreement, China committed to eliminate all export duties except for 84 specific items (Smith, 2009). Moreover, Article I:1 of GATT provides for general most-favoured-nation treatment of exports as well as imports. The Article applies “with respect to customs duties and charges of any kind imposed on or in connection with importation or exportation…”.

Article XI of GATT 1994 explicitly prohibits quantitative export restrictions whether through quotas, import or export licenses or other measures. It states that “No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.” However, Article XI also provides some exceptions to the general rule including under paragraph 2(a): “export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party”, and paragraph 2(b): “import and export prohibitions or restrictions necessary to the application of standards or regulations for the classification, grading or marketing of commodities in international trade”.

A further basis for imposing export restraints is found in Article XX, the “general exceptions” provision. Provided such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, members are allowed an exemption from otherwise applicable GATT disciplines in specific situations, including:

if necessary to protect human, animal or plant life or health;

to conserve exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption;

in pursuing obligations under any intergovernmental commodity agreement which conforms to the criteria of such agreement;

to ensure that essential quantities of domestic materials are available to a domestic processing industry during periods when the domestic price of such materials is held below the world price as part of a governmental stabilization plan; provided that such restrictions do not increase the exports of or the protection afforded to such domestic industry and are not discriminatory;

if essential to the acquisition or distribution of products in general or local short supply, provided that any such measures shall be consistent with the principle that all contracting parties are entitled to an equitable share of the international supply of such products, and



that any such measures, which are inconsistent with the other provisions of the Agreement shall be discontinued as soon as the conditions giving rise to them have ceased to exist.

Article XIII provides that when export prohibitions or restrictions are used for goods, they must be applied on a non-discriminatory basis to all members.

Article XXI provides for the exemption of measures, including export restrictions, from the general legal obligations contained in the GATT for the purpose of national security.

Article 12 of the Uruguay Round Agreement on Agriculture (URAA) stipulates that in cases where countries institute new export prohibitions on foodstuffs in accordance with paragraph 2(a) of Article XI of GATT 1994, they must take into account the effects of such prohibitions on importing members’ food security and should give notice in writing as far in advance as practicable to the Committee on Agriculture indicating the nature and duration of the measure. Specifically, a member instituting new export prohibitions must observe the following provisions:

The member instituting the export prohibition or restriction shall give due consideration to the effects of such prohibition or restriction on importing members’ food security;

Before any member institutes an export prohibition or restriction, it shall give notice in writing, as far in advance as practicable, to the Committee on Agriculture comprising such information as the nature and the duration of such measure, and shall consult, upon request, with any other member having a substantial interest as an importer with respect to any matter related to the measure in question. The member instituting such export prohibition or restriction shall provide, upon request, such a member with necessary information.

Paragraph 2 of Article 12 of the URAA exempts developing country members from the requirement to give notice and consult, unless the measure is taken by a developing country member that is a net exporter of the specific foodstuff concerned.

Note to Annex 1.A

1. For more information about WTO rules, see Chapters 4 and 5.



Annex 1.B.

Export measures defined

Export restriction Definition*

Export tax A tax collected on goods or commodities when they leave a customs territory. This tax can be set either on a per unit basis or an ad valorem (value) basis. Other terminology equivalent to export tax: export tariff, export duty, export levy, export charge. In some countries the term ‘cess’ is used.

Fiscal tax on exports A tax not paid at the border, but that only applies to, or discriminates against, goods or commodities intended for export. An example is when the sales tax that a government charges is higher for goods or commodities intended for export than when these goods or commodities are offered for sale in the domestic market. Other terminology equivalent to fiscal tax on exports: export royalty.

Export surtax A tax collected on goods or commodities when they leave a customs territory, and which is applied in addition to the normal export tax rate. It can be part of a progressive tax system or can be triggered by a price threshold, and so be of a temporary nature. Example: a USD 10 surcharge is applied on each ton of a commodity exported when the world price of this commodity exceeds USD 900/ton. Other terminology equivalent to export surtax: export surcharge.

Export quota A prescribed maximum volume of exports.

Export prohibition An absolute restriction on exports, i.e. zero exports. Other terminology equivalent to export prohibition: export ban, export embargo.

Export license/Licensing requirement

The requirement to obtain prior approval, in the form of a license, to export a good or commodity. There are two types of licensing requirements: (1) Non-automatic export licensing: Exporters must obtain prior approval, in form of a license, to export a good or commodity. This practice requires submission of an application or other documentation as a condition for being authorised to export. Export licenses are often used in conjunction with export quotas. Apart from economic reasons, licensing can be applied for non-economic reasons: national security, protection of health, safety, the environment, morality, religion, intellectual property, or compliance with international obligations. Licensing schemes can operate on the basis of product lists, such as lists of banned products or of restricted products that require licences, or be applied to restrict exports by destination (e.g. specific countries), or have other conditions attached, such as that export may be used for a specified purpose only. Other terminology equivalent to non-automatic licensing: export permit. (2) Automatic export licensing: Approval for export is granted in all cases, usually immediately upon a standardised application. This kind of measure usually only assists in the compilation of statistics, does not create burdens or extra transaction costs for exporters and is not recorded in the Inventory.

Minimum export price/price reference for exports

A minimum permitted price for a good being exported. This practice is often used in conjunction with export taxes because it can facilitate customs procedures by preventing under-invoicing, and can be used as a base for calculating export taxes. In some cases, minimum export prices are not binding but are used as reference prices. Other terminology equivalent to minimum export price: administered pricing.

Dual pricing scheme The government applies different prices to a product when it is exported than when the same product is sold in the domestic market.

VAT tax rebate reduction/withdrawal

Most countries with a VAT system will rebate the VAT on exports. By denying VAT reimbursement in whole or part, it is less advantageous to export a product than to sell it domestically. This in turn encourages exports of products produced locally that use the input to produce downstream products. A variant is the removal or reduction of rebate from other sales taxes on exports of a product.



Export restriction Definition*

Restriction on customs clearance point for exports

The government specifies ports/entry points through which export of a good or commodity is to be channelled.

Qualified exporters list The rights to export a certain commodity are allocated to specific companies by the government, through a process of application and registration.

Domestic market obligation (DMO)

The requirement for producers of coal and other minerals to allocate a proportion of their annual production output to the domestic market. (The term “domestic market obligation” appears to be specific to Indonesia, which introduced this measure as an integral part of production-sharing contracts to ensure that foreign contractors were also held responsible for fulfilling the domestic needs of its people.)

Captive mining When a processing company is required to own the mine that produces its inputs, or has been awarded mining rights with the intention that the company will mine the commodity for use in its own domestic processes and not trade it. Captive mining is a form of government support for firms with access to captive supplies, as well as a means of controlling the price and availability of a commodity. When captive mining concessions increase (as a share of production), exports are likely to fall.

Other export measures Measures not elsewhere specified, but which influence de jure or de facto the level or direction of exports of goods or commodities.

* Guidance for these definitions of export measures has been provided by the following: OECD (2003), p.8; Bonnariva et al. (2009), p.2 ; Kim (2010), p.6 and 12 ; Goode (1998).



Annex 1.C.

OECD Inventory coverage

Countries surveyed for industrial raw materials Minerals, metals and wood products covered

Algeria India Rwanda Aluminium Lithium Vermiculite

Argentina Indonesia Saudi Arabia Antimony Magnesite Zinc

Afghanistan Iran Senegal Arsenic Magnesium Zircon

Australia Ireland Sierra Leone Asbestos Manganese

Austria Israel Slovak Rep. Barytes Mercury Rare earth elements:

Azerbaijan Italy South Africa Bauxite Mica Yttrium

Belarus Côte d’Ivoire South Korea Bentonite Molybdenum Scandium

Belgium Jamaica Spain Beryllium Nickel Cerium

Benin Japan Sri Lanka Bismuth Niobium Dysprosium

Bolivia Jordan Suriname Borates Palladium Erbium

Botswana Kazakhstan Sweden Bromine Peat Europium

Brazil Kenya Syria Cadmium Perlite Gadolinium

Canada Kuwait Tajikistan Chromium Phosphates Holmium

Cent. African Republic

Kyrgyzstan Tanzania Cobalt Pig iron Lanthanum

Chile Lesotho Thailand Coke Platinum Lutetium

China Malaysia Trinidad and Tobago

Coking coal Potash Neodymium

Chinese Taipei Mali Tunisia Copper Pumice Praseodymium

Colombia Mauritius Turkey Diamonds Rhenium Promethium

Czech Rep. Mexico Turkmenistan Feldspar Rhodium Samarium

Dem. Rep. of Congo

Mongolia Uganda Fluorspar Ruthenium/Iri-dium/Osmium

Terbium

Denmark Morocco UK Fuller’s earth Salt Thulium

Dominican Rep. Mozambique Ukraine Gallium Selenium Ytterbium

Egypt Namibia United Arab Emirates

Garnet Silica

Fiji New Caledonia Uruguay Germanium Silicon

Finland New Zealand United States Graphite Silver Scrap and waste of metal

France Nigeria Uzbekistan Gold Stone

Gabon North Korea Venezuela Guano Strontium

Gambia Norway Viet Nam Gypsum Sulphur Wood

Germany Pakistan Zambia Indium Talc Tropical logs

Ghana Paraguay Zimbabwe Iodine Tantalum Trop.sawnwood

Greece Peru Iron Tellurium Tropical plywood

Grenada Philippines Kaolin Thallium Tropical veneers

Guinea Poland Kyanite Tin Non-tropical logs

Guyana Portugal Lead Titanium Non-tropical sawnwood

Hungary Russia Lime Tungsten Non-trop. plywood

Vanadium Non-trop. veneer

Note: In bold – country was among the top 5 producers in 2009 for one or several of the raw materials (metals, minerals, wood) listed. For the EU – top producers were identified at the level of individual EU members, but trade flows and findings are reported for the EU as a whole.



Countries surveyed for agricultural commodities Agricultural commodities covered

Argentina

Belarus

China

Former Yugoslav Republic of Macedonia

Egypt

India

Indonesia

Kazakhstan

Kyrgyz Republic

Moldova

Myanmar

Pakistan

Russia

Tajikistan

Ukraine

Viet Nam

All agricultural and food products as defined by the WTO. This comprises primary bulk commodities, semi-processed commodities and produce (horticultural products and processed products). Primary bulk commodities include: Coffee, tea, coffee mate, wheat, rye, barley, oats, corn, rice, sorghum, other grains, soybeans, peanuts, oilseeds, cocoa beans, tobacco, cotton, hemp.



Annex 1.D.

OECD Inventory Countries using export restrictions

Country Minerals

and metals Waste

and Scrap Wood Agriculture

Afghanistan X X

Algeria X

Argentina X X

X

Australia X

Azerbaijan X X

Belarus X X X

Benin X

Bolivia X X

Brazil X X

Canada X

China X X X X

Colombia X X

Cote d'Ivoire

X

Dominican Republic X X

Egypt

X

X

Fiji X

Gabon X

Gambia X X

Ghana X X X

Grenada X

Guinea X X

Guyana X

India X X X X

Indonesia X X X X

Jamaica

X

Japan X

Kazakhstan X X

X

Kenya X

Kuwait

X

Kyrgyz Republic X

Former Yugoslav Republic of Macedonia

X

Malaysia X X X

Mali X

Mauritius X X

Moldova

X

Morocco X

Myanmar

X

Namibia X

Nigeria

X X

Pakistan X X

Paraguay X X

Philippines X

Russia X X X X



Country Minerals

and metals Waste

and Scrap Wood Agriculture

Rwanda X X

Senegal X

Sierra Leone X

South Africa X X

Sri Lanka X X

Syria X

Tajikistan X X X

Tanzania

X

Thailand X X

Trinidad and Tobago

X

Tunisia X

Turkmenistan X X

Uganda X X

Ukraine X X

X

United Arab Emirates X

United States

X

Uruguay X X

Venezuela

X

Viet Nam X X X

Zambia X X

Zimbabwe X

Column Totals 41 45 11 16

Note: For industrial materials records relate to the period 2009-2012. For agricultural commodities, records relate to 2007-2011.

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