trade

policy brief

Trade in raw materials February 2019

No country is self-sufficient in key raw materials.

How revenue from the mining sector is spent is as important as how much is collected.
Export restrictions are not the best way to support or create a downstream processing industry.

What’s the issue?

Almost all consumer goods today contain raw materials
from the mining sector; for example, a mobile phone
can contain 50 different minerals and metals. While
no country is self-sufficient in these materials, mineral
resources represent a vast stock of wealth in some
countries where exports of such products dwarf all other
exports.
But the mining sector often provides little employment
in the countries where extraction occurs. Some countries
have implemented export restrictions to try to increase
the value added of their natural resources and create jobs
in processing industries. The rationale is that restricting
exports of minerals will help to foster a downstream
processing industry through lower input prices, thereby
creating more jobs domestically. Other countries use
such restrictions to generate revenue, control illegal
exports or the export of illegally mined products, enhance
environmental protection, or offset exchange rate impacts
caused by the export of few commodities. These are all
legitimate policy goals to be determined in each country
by its citizens’ preferences.

Most restricting measure on exports of minerals and metals, 2014

No restrictions

Non-automatic licensing

other export measures

Export tax

Export quota

Export prohibition

Source: OECD Inventory of Export Restrictions on Industrial Raw Materials

www.oecd.org/trade tad.contact@oecd.org @OECDtrade

Trade in raw materials

Export restrictions often do not achieve

desired objectives Watch the video
The research is clear that export restrictions are generally
not the best way to regulate the mining sector, and often
do not achieve their desired objectives. Indeed, in some
cases they have the opposite effect.

The impacts of export restrictions are exacerbated when

commodities are produced in only one or two countries.
For example, platinum group metals are produced in a
small number of countries but are necessary to produce
many electronics – from computers, to mobile phones,
to catalytic converters. If countries that control global
production of raw materials restrict their exports, global Raw materials are essential to everyday life - did you know
markets can be heavily impacted – prices of those that your mobile phone is made using 50+ different minerals
commodities rise sharply, and their consumers may not and metals?
have access to the materials they need.
Watch the video at https://youtu.be/3bSLYw_HYdU
In a study estimating the effect of removing all export
barriers on steel and steelmaking raw materials, OECD
found a positive impact on global welfare and in those
countries that use export restrictions on those materials.
These results therefore suggest that export restrictions • Providing high-quality, detailed geological information
are not an appropriate policy instrument to respond to is of prime importance for minerals-rich countries
the challenges of regulating the extractive sector for wishing to attract investment. Such information is a
economy-wide, sustainable growth. Despite this, export- public good and can enhance the efficiency of mining
restricting measures are prevalent on many raw materials and prospecting operations.
such as minerals and metals (see figure).

What should policymakers do? Further reading

If trade policies such as export restrictions do not achieve

their objectives, what are the alternatives? Some countries
have been successful in leveraging their mineral resources
for sustainable, economy-wide growth. They have shown
the viability of alternatives to export restrictions. OECD
analysis points to some successes and shares lessons
from their experiences:
• Regulatory stability is of prime importance to mining
firms, as they are obliged to make long-term capital
investments; stable tax frameworks are particularly
important.
• Good fiscal rules that encourage spending minerals
tax revenues in a counter-cyclical fashion help
contain exchange rate volatility. It is important to
reach a balance between spending and investment
of minerals revenues, taking account of domestic
absorptive capacity.
• Mining intensive countries can diversify their
economy by creating clusters around their mining
sectors. Services are particularly important in
creating jobs throughout the mining value chain.
• Controls on illegal mining and support for sustainable
mining practices help mitigate negative externalities
and potential harm to other industries.
• OECD Inventory of Restriction on Exports of
Industrial Raw Materials. http://qdd.oecd.
org/subject.aspx?Subject=ExportRestrictions_
IndustrialRawMaterials
• OECD (2014), Export Restrictions in Raw Materials
Trade: Facts, fallacies and better practices, OECD
Publishing, Paris. https://issuu.com/oecd.
publishing/docs/oecd-export-restrictions-raw-
materi
• Korinek, J. (2013), “Mineral Resource Trade
in Chile: Contribution to Development and
Policy Implications”, OECD Trade Policy Papers,
No. 145, OECD Publishing, Paris, https://doi.
org/10.1787/5k4bw6twpf24-en.
• Korinek, J. (2014), “Export Restrictions on
Raw Materials: Experience with Alternative
Policies in Botswana”, OECD Trade Policy Papers,
No. 163, OECD Publishing, Paris, https://doi.
org/10.1787/5jzb6v86kz32-en.
• Korinek, J. (2015), “Managing the Minerals
Sector: Implications for Trade from Peru
and Colombia”, OECD Trade Policy Papers, No.
186, OECD Publishing, Paris, https://doi.
org/10.1787/5jrp6wrc2r7l-en.

www.oecd.org/trade tad.contact@oecd.org @OECDtrade