This article is part of our special report Raw Materials.
While Europe tries to ensure undistorted access to raw materials for its industries, commercial conflicts over export restrictions are a growing area of tension in international trade, with developing countries defending their right to curtail global access to their resources in support of domestic economic development.
"World history has been influenced by hostile resource wars and much of the European expansion and colonisation of Africa was to control raw materials," said Mogens Peter Carl, former director-general of the European Commission's trade department.
Speaking in Brussels on Tuesday (1 March), Carl, who is now senior advisor at communications consultancy Kreab Gavin Anderson, warned that "there is a danger of a resource war even today – but from the commercial aspect only".
The EU is already highly dependent on imports of raw materials for its industry. The dependency rate for minerals ranges from 48% for copper ore and 78% for nickel to 100% for materials such as cobalt, platinum and titanium.
Due to this import dependency, the EU's raw materials strategy, updated in February this year, places particular attention on fighting export restrictions, including export taxes, bans and regulated exports.
The world is already witnessing a resource war today, Carl said, referring to a series of ongoing commercial conflicts caused by Chinese export restrictions on rare earths.
"China restricts its exports but allows local companies to use and transform them into finished products – that's what the conflict is about," Carl explained.
The export restrictions allow China's domestic processing industry to develop and become more competitive on world markets – eventually undermining EU business competitiveness.
Last October, German companies complained that they were being pressured by Beijing to boost their investment in China if they wanted to secure access to rare earth minerals.
Export revenue is Africa's economic development
But EU outrage over Chinese rare earth export quotas is just one illustration of the wider EU policy of fighting export restrictions, regulations and taxes in developing countries in order to ensure continuous supplies for European industry at competitive prices.
Many developing countries are highly dependent on raw material exports and most of their revenue comes from export taxes, which can be used to promote industrialisation and economic development at home.
Indeed, the EU's efforts to liberalise trade and secure unrestricted access to precious resources in African and other developing countries is seen by those nations as an attempt to undermine their economic development.
Oxfam International, an NGO fighting poverty and injustice, slammed the February policy paper issued by the European Commission, which identified trade agreements as one of the three pillars of the EU's raw materials strategy. For the NGO, the EU's promises of a better partnership with Africa are no more than "window dressing for a forceful diplomatic and trade strategy".
According to Oxfam, the bloc is merely seeking to continue pursuing its own narrow commercial interests in its relations with developing countries, with little real effort to ensure mutual benefit.
The EU executive is not only attempting to force developing countries to ban or curb the use of export taxes, Oxfam stressed, it is also "trying to negotiate new rules on investment that will give European companies unprecedented access to developing country raw materials on the same or even better terms as local businesses".
Referring to mining in Africa as "a hot potato," Frank Hoffmeister, deputy head of staff for EU Trade Commissioner Karel de Gucht, stressed that Africa still holds some of the largest unexploited mineral resources in the world.
But while the EU is still the continent's main trading partner, its relative share is declining as China expands its commercial relations there, Hoffmeister noted, adding that trade between Africa and China had grown ten-fold between 2002 and 2008, from €10 billion to €140 billion.
WTO a 'no-solution'
Europe is unsure how to respond to export restrictions imposed by developing countries, because they often relate to legitimate concerns over the exporting country's economic development and EU trade diplomacy is often seen as arm-twisting by its partners.
Rufus Yerxa, deputy director-general at the World Trade Organisation (WTO), acknowledged that export restrictions are clearly "an area of growing tension" in which new disputes are arising.
But Yerxa noted that the WTO does not have any specific agreement to regulate trade in raw materials and that many issues related to them are actually dealt with outside its structures. These issues include ownership of natural resources, investment policies, environmental protection and the fight against corruption in international business transactions.
He said the body's rules were initially developed to deal with import-related protectionism rather than export restrictions. WTO rules on this are therefore yet to be tested, he noted.
A pending WTO case on raw materials brought up against China by the EU, US and Mexico in 2009 is expected to provide further guidance on the issue, Yerxa said.
The official also stressed that WTO is a consensus-based organisation, and that any new rules at international level can only be created if everybody agrees on them.
Solutions lie the EU's own backyard
For the former director-general of the European Commission's trade department, Mogens Peter Carl, focusing merely on trade and export restrictions will only solve short and medium-term issues related to raw materials. The potential threat of scarcity in the long term will remain, he warned.
According to Carl, international negotiations represent only 10% of the total solution on access to raw materials, whereas further exploration and exploitation of new resources could offer an extra 20%. Meanwhile, "the major part of the solution – 70% – is on our own backyards," he said, citing Europe's complete domestic control over activities such as waste collection and recycling, waste exports and the promotion of research on substitution and recovery.
The WTO's Yerxa also argued that trade measures are typically "the second best policy option to address problems associated with raw materials". For him, the best option is domestic policy, because it addresses the problem comprehensively and "in a more undistorted manner".