EU Outlines Strategy on Raw Materials; NGOs React

14 November 2008

The European Commission has announced a wide-ranging plan aimed at improving and securing access to raw materials, amidst growing fears that the financial crisis could prompt a surge of protectionist policies around the globe.

“We must act, to ensure that access to raw materials for enterprises will not be hampered,” the EU’s Commissioner for Enterprise and Industry, Günter Verheugen, said in a statement last week. “We need fair play on external markets, a good framework to foster sustainable raw materials supply from EU sources as well as improved resource efficiency and more use of recycling,”

Taking the form of a ten-point plan, the strategy is based on three ‘pillars’: access to raw materials on the global markets at undistorted conditions; establishing a framework for the sustainable supply of raw materials; and increased resource efficiency, including the promotion of recycling of raw materials. The strategy will receive input from the Commission, EU members and industry representatives, the Commission said in a press release.

The initiative is driven by concern within Europe, which imports between 70 and 80 percent of its primary resources, that governments and industries may soon struggle to source the materials that their manufacturing industries need to make finished goods. The production of a mobile phone, for example, requires 40 different raw materials. Some fear that inaction to secure a stable and undistorted supply of raw materials will put European industries at a competitive disadvantage.

“Many resource-rich countries are applying protectionist measures that stop or slow down the export of raw materials to Europe in order to help their downstream industries,” the EC said in the statement. “On top of this, some emerging countries are becoming very active in resource-rich countries, particularly in Africa, with the aim of securing a privileged access to raw materials.”

European non-governmental organisations protested against what they perceived to be an aggressive EC strategy, however. Charly Poppe, trade and economic justice campaigner at Friends of the Earth Europe said: “Europe's wish to feed its insatiable appetite for raw materials has translated into a direct attack on developing countries' sovereignty over their natural resources – this sends a very bad signal to the world and is damaging the EU's reputation as a frontrunner in development and environmental protection.”

“The EU should instead support developing countries' efforts to diversify their economy, reduce their export dependency on primary raw materials and protect their exhaustible natural resources. Strong regulation in Europe should not be bypassed by deregulating raw materials markets abroad,” he added.

Growing demand for primary materials from emerging economies has put pressure on the supply of these commodities. According to the EU, there are over 450 export restrictions – intended to reserve raw materials for use by domestic industries – on more than 400 raw materials, ranging from metals to wood and chemicals.

Furthermore, many essential raw materials are located in a limited number of countries. China produces 95 percent of all rare earth concentrates, which are used in the production of many consumer electronics, and Brazil supplies 90 percent of all niobium, which is needed for steel alloys. And some crucial raw materials are located in areas of political and economic instability, the EC said.

The EU has raised the issue of raw material supply several times over the last few months. In September former EU Trade Commissioner Peter Mandelson warned that the EU may take action against countries that impose trade restrictions on raw materials (see BRIDGES Weekly 2 October 2008, http://www.ictsd.org/bridges-news/bridges/news/eu-warns-against-trade-restrictions-on-raw-materials). And currently, the US is challenging Chinese tax restrictions on exports of raw materials used in the steel industry through the WTO’s dispute settlement mechanism (see BRIDGES Weekly, 25 September 2008, http://www.ictsd.org/bridges-news/bridges/news/china-launches-wto-dispute-against-us-import-tariffs).

ICTSD reporting; “European plan to improve raw materials security,” PRC.COM, 10 November 2008; “EU launches strategy to ensure access to raw materials,” DOW JONES NEWSWIRES, 5 November 2008; “EU Raw Materials Initiative: Industry Interests Undermine Sustainable Resource Use,” FOE RELEASE, 5 November 2008.

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