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WTO Panel Says Critical Minerals Trade Is Becoming Zero Sum

On a panel on critical minerals ally-shoring, panelists representing the perspective of Latin America, the U.S., the EU and, to some degree, China, agreed that the current race to lock down supplies of the raw materials needed for advanced batteries, wind turbines and computer chips is one where every man is out for himself, and resource-rich countries in the Global South are exploited.

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Katrin Kuhlmann, co-director of the center on inclusive trade and development at Georgetown Law, noted that both the Inflation Reduction Act's terms and the way that the EU signs trade deals that ensure Kazakhstan or Chile don't impose export restrictions on the EU for these valuable materials violate the most favored nation principle. In the case of the U.S., it also violates national treatment rules at the World Trade Organization.

"Are we comfortable with these big deviations from these fundamental principles that we have spent years arguing and debating and refining?" she asked during a discussion held in Geneva Sept. 14 as part of the WTO's Global Forum.

Given the proliferation of critical minerals bilateral agreements, the answer appears to be yes.

Elyse Kneller, a lawyer at Brussels-based law firm Van Bael & Bellisin, noted that the EU is 80% import-dependent on raw materials. She said the EU uses antidumping and countervailing duty laws against exports from countries that seek to move up the value chain by either subsidizing processing of their critical minerals or putting export restrictions on those goods so that domestic industries can develop using that material.

From the perspective of the countries trying to impose export restrictions, they just want to profit more from their resources, Kuhlmann said. Amrita Bahri, a law professor at Mexico's ITAM university and WTO Mexico chair, said Mexico has fully nationalized its mining sector, and will allow no future concessions to private firms. The law also said the government could terminate current concessions to private companies without justification, she said.

Moderator Henry Gao, a law professor in Singapore, called critical minerals ally-shoring "one of the most cutting edge issues that faces the world trading system today."

Weihuan Zhou, co-director of the China International Business and Economic Law Center in Australia, said China's moves to restrict the export of critical minerals have been misunderstood as economic coercion.

"I would say, in most circumstances, China remains in a defensive or responsive position," he said. He said the recent moves on gallium and germanium (see 2308150028) were a reaction to U.S. export restrictions in the semiconductor sector. He also said China's export restrictions on rare earths in 2010 did not target a specific country. That action is generally described as an act of economic coercion against Japan over unrelated geopolitical issues (see 2103300056 and the first in a line of coercive moves from the Chinese government.

Zhou said even though China is dominant in critical minerals processing across a number of products, China faces the same problems all industrial countries do -- it's import-dependent on nickel, cobalt, chromium and lithium; it projects a shortage in 22 of 37 critical minerals; it needs to diversify its sources of the materials.

The strategies it's taking to secure supplies and access to manufacturing-ready materials "are not intended to cause disruptions in global supply chains," he said, but rather are designed to boost China's competitiveness. He said "China is certainly not unique in this regard," as it focuses on its own economic needs without considering the impact on global trade.

He predicted China will impose fewer export restrictions that others see as coercive, and the country "will become increasingly cautious" in order to protect its global reputation.

Gao asked the panelists if there's a role for the WTO in this area. Japan did win a case at the WTO against Chinese export restrictions; the EU also has won some cases, but in one case, can't continue the litigation, because the other country appealed into the void.

Kneller said, "We really need to reform the appellate body." She said the WTO doesn't have much in the way of rules curtailing export restrictions, but the rules it does have "are meaningless if they cannot be enforced."

Zhou, too, said the WTO is a great place to convene discussions on ensuring reliable critical minerals supply chains. He said: "You would be more effective discussing these issues with China included."