This article is part of our special report Raw Materials.
Sharp differences emerged between EU-US and Asian policymakers over whether to regulate commodities trading during a policy debate at a European Commission-hosted conference on raw materials, held on Tuesday (14 June) in Brussels.
EU Internal Market Commissioner Michel Barnier and Bart Chilton, the commissioner of the US Commodity Futures Trading Commission, broadly agreed with French President Nicolas Sarkozy's call earlier that day for all G20 countries to commit themselves to tighter regulation against financial speculation.
But Chinese delegate Daochi Tong, director-general of the department of international affairs within the China Securities Regulatory Commission, questioned whether their diagnosis of price volatility was right.
Tong: Don't blame China – look to the US
Addressing a session on policy responses to commodity price volatility, Tong said he had heard too much blame for rising prices laid at the door of the Chinese. He said that – despite massive growth in grain consumption in China between 1990 and 2005 – the price had only shown marked rises since 2005.
He pointed to the use of grain in the US biofuels industry as being as likely to cause price volatility. "Even if the average yearly increase in consumption of grain may be small as a result of its use in the [US] biofuels sector, it has an incremental influence [on price]," he told the conference.
Speaking afterwards to EURACTIV, Tong said that he was not opposed to greater transparency or regulation in itself, but he added: "Transparency is a good thing and so too can be regulation, but not when applied in a way that distorts the market and is in effect like a trade protection move. A good example of that is the carbon tax being applied to airlines by the EU."
He said that the proposed regulation on trading in commodities "could have similar unintended consequences".
Australian: US, EU should 'stop mucking about'
Also dismissing proposals to regulate speculation on commodities, Mitch Hooke, CEO of the Minerals Council of Australia, asked when the US and EU were "going to get serious about the problem," which he said was caused by supply-side problems amid over-regulation.
He said: "There is not a lot you can do to influence the price of commodities without tackling the issue of supply constraints [caused by over-regulation], rather than mucking about on the edge of the problem."
Barnier hit back, saying: "You ask us to be serious [about dealing with the volatility in the markets], but we are being serious and we have brought forward policy proposals to deal with these issues."
He added: "I do not agree when you say ‘leave the market alone', because I do not believe that the market will regulate itself: the absence of an intrinsic morality has already been highlighted there."
Asked afterwards by EURACTIV whether he was disappointed with the negative Chinese response to regulation, Chilton said he believed that those countries upon which the financial crisis had impacted least "have a harder time seeing the need for regulation".
He added: "I understand that, but I don't think it’s the right approach to make. I don't want to see a situation where the markets gather at the shallowest [least regulated] end of the pool. The question is: how do we get to a reasonable compromise?"