EXPORT BARRIERS AND GLOBAL TRADE IN RAW MATERIALS: THE STEEL INDUSTRY EXPERIENCE

1. EXPORT BARRIERS AND GLOBAL TRADE IN RAW MATERIALS: THE STEEL INDUSTRY EXPERIENCE Alan Price

2. Raw Materials • The global steel industry depends on key raw materials • Iron ore • Steel scrap • Coke • Coal • Ferroalloys • Natural gas • These raw materials are internationally traded • Over 40% of world iron ore production is traded internationally • Few countries are self-sufficient in all of these raw materials

3. A Worrisome Trend • World demand for raw materials for making steel is likely to continue to increase • Increased steel production in China, India, and Brazil • Economic recovery • But a growing number of countries are imposing restrictions on exports of raw materials • The following slides identify some of the restrictions that various countries have imposed on exports of raw materials used to make steel • Rules regarding export restrictions change frequently, making supply even more problematic

4. China • China restricts exports of • Coke • Steel scrap • Molybdenum • Fluorspar • Magnesium carbonate • Silicon carbide • Tin • China is among the world’s leading producers of • Coke • Fluorspar • Magnesium carbonate • Molybdenum • Silicon carbide • Tin

5. Russia • Russia restricts exports of • Ferrous scrap • Aluminum ore and concentrates • Molybdenum ore and concentrates • Tin waste and scrap • Tungsten waste and scrap • Antimony waste and scrap • Nickel waste and scrap • Nickel products • Coking coal • Russia is the world’s largest producer of nickel

6. Ukraine • Ukraine restricts exports of • Ferrous scrap • Ferro-chromium-nickel • Unrefined copper • Copper waste and scrap • Nickel waste and scrap • Aluminum waste and scrap • Lead waste and scrap • Zinc waste and scrap • Tin waste and scrap • Tungsten waste and scrap

7. India • India restricts exports of • Iron ore • Ferrous scrap

8. Indonesia • Indonesia restricts exports of • Steel scrap • Copper ores and concentrates • Lead ores and concentrates • Tin ores and concentrates • Indonesia is the world’s second-largest producer of tin

9. Other Countries • A number of countries impose restrictions on exports of steel scrap • Argentina • Azerbaijan • Egypt • Iran • Kazakhstan • Saudi Arabia • Thailand • United Arab Emirates

10. Forms of Export Restrictions • Export bans • Quotas • Export taxes • No VAT export rebates • Licensing requirements

11. Conservation of Natural Resources • Conservation of natural resources is often given as a reason for export restrictions • The GATT allows trade-restricting measures to conserve limited natural resources “if such measures are made effective in conjunction with restrictions on domestic production or consumption” • But without limits on mining, production, or domestic consumption, export restrictions do not actually conserve resources • WTO members must show that measures to conserve resources are not a “disguised restriction” on international trade

12. Environmental Protection • China has claimed that export restrictions on coke and other energy-intensive inputs protect the environment by reducing greenhouse gas and other emissions • Because there are no limits on production for domestic consumption, there is no evidence that export restrictions in fact reduce energy use and pollution

13. Orderly Markets • Some countries claim that licensing of exporters is needed to ensure an orderly market • There is no evidence that absence of licensing procedures in other countries disrupts the market • To the contrary, licensing procedures can be used as a disguised restriction on international trade • Licensing procedures can also be used to favor domestic over foreign traders

14. Revenues • Some countries have claimed that export taxes provide needed revenue • The amount of revenue raised from export taxes is quite small compared to other sources of government funds • A tax on production of an input would raise more revenue without discriminating against foreign purchasers

15. Effects of Export Restrictions • Wide spreads between domestic and export prices • This gives an advantage to consuming industries in the exporting country • Higher international prices • Volatile international prices • Disproportionate impact on developing countries

16. Spread Between Domestic and International Prices

17. Export Restrictions and Coke Prices • Changes in coke prices are not associated with changes in either steel production or steel prices • Changes do reflect imposition of export restrictions by China

18. Volatility in Raw Material Prices

19. Impact on Developing Countries • Restrictions on raw material exports impact developing countries disproportionately • 50% of iron ore that is imported is imported by developing countries • The steel industries in many developing countries are heavily dependent on imports of iron ore • Argentina: 100% of consumption • Libya: 100% of consumption • Philippines: 100% of consumption • Serbia: 100% of consumption • Trinidad & Tobago: 100% of consumption • Indonesia: 99% of consumption • Egypt: 68% of consumption • Turkey: 61% of consumption

20. Conclusion • Restrictions on exports of raw materials for steel making • Give domestic producers in the exporting country an unfair competitive advantage • Increase worldwide costs of production • Do not match up to the justifications given • Place a heavy burden on the steel industry in developing countries that do not have substantial iron ore reserves or steel scrap supplies