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

2. 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. 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. 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. 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. 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. 7 India India restricts exports of –Iron ore –Ferrous scrap

8. 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. 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. 10 Forms of Export Restrictions Export bans Quotas Export taxes No VAT export rebates Licensing requirements

11. 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. 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. 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. 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. 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. 16 Spread Between Domestic and International Prices

17. 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. 18 Volatility in Raw Material Prices

19. 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. 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