Trade in Commodities, Obstacles to Trade and Illegal Trade

11-09-2015

Free trade in raw materials is of great importance for the EU. China remains the EU’s main supplier of critical raw materials and thus concentrates on the most recent evidence on its export restrictions. Despite recent WTO rulings, China is still implementing a wide range of trade distorting measures in the form of export licensing or through the introduction of a resource tax. While we can trace certain welfare benefits for the Chinese domestic market following the introduction of export restrictions, we can clearly relate increasing illegal trade outflow from China to its restrictive trade policies. While the use of the WTO provides one of the most straightforward mediums to offset trade distortions, more effective measures include the addition of explicit clauses on critical raw materials in bilateral trade agreements and a strong regulatory framework in the member states prohibiting imports of conflict or illegal raw materials.

Free trade in raw materials is of great importance for the EU. China remains the EU’s main supplier of critical raw materials and thus concentrates on the most recent evidence on its export restrictions. Despite recent WTO rulings, China is still implementing a wide range of trade distorting measures in the form of export licensing or through the introduction of a resource tax. While we can trace certain welfare benefits for the Chinese domestic market following the introduction of export restrictions, we can clearly relate increasing illegal trade outflow from China to its restrictive trade policies. While the use of the WTO provides one of the most straightforward mediums to offset trade distortions, more effective measures include the addition of explicit clauses on critical raw materials in bilateral trade agreements and a strong regulatory framework in the member states prohibiting imports of conflict or illegal raw materials.