“Resource nationalism”

The EU intends to adopt special measures against countries that, in view of the surging costs of raw materials, are introducing export duties or imposing export restrictions on certain products, reported the European Commission, citing the draft of a speech that European Union Trade Commissar Peter Mandelson will give at a meeting with industrialists in Brussels.

According to the European Commission, Mandelson is going to declare that the EU will tighten up its trade policy to fight export duties and other export limitations on raw materials imposed by the EU’s trading partners. Today, Brussels says, at least 450 export restrictions are in force in the global economy. They have been imposed on iron, timber, chemical products, and textiles by such leading exporters as China, Russia, Ukraine, Brazil, and Argentina.

Mandelson hopes to obtain favorable conditions for European producers by adopting a series of measures aimed at combating “resource nationalism.” In particular, the EU plans to raise the issue of export restrictions during WTO accession negotiations (of the above-mentioned countries, only Russia remains outside the WTO) and negotiations of free trade agreements. Such protective trade measures as antidumping duties may be applied. The Day asked some Ukrainian experts to clarify how Ukraine figures in this issue and whether this will have an impact on its relations with the EU.

The news caught economists by surprise. “I don’t recall that Ukraine had export restrictions on iron or timber. That’s why this information is a great surprise to me. I don’t understand why they put our country on this list,” economist Viktor Lysytsky said.

Ukraine recently had quotas on grain exports, he says, but now at every step of the way they are yelling about giving the green light to these exports. If Ukraine decides at some point to limit its grain exports again, that is the country’s internal affair. “We cannot feed everyone in the world. So what does our market and our workers have to do with this?” Lysytsky asked.

Oleksandr Zholud, an economist at the International Center for Policy Research, agrees that Ukraine has no export restrictions. However, there are certain nuances. “We constantly run into problems with the EU over the export of sunflower seeds (on which Ukraine has an export duty - N.B.). However, in a few years this duty will be canceled and the problem will cease to exist. The EU may point to inconsistencies in Ukraine’s policy on grain exports, but this is another matter. Last year the government imposed quotas. This is definitely a certain export restriction that exporters did not foresee when they were signing grain export contracts,” Zholud said. In his opinion, however, any references of this kind in Mandelson’s speech will provide only very tentative grounds for the EU’s applying protective measures against Ukraine.

If this situation develops, the EU will most likely be able to play the “resource nationalism” card in its dealings with China and Russia. Russia has export duties on a number of items, including oil and oil products. In November 2007 Russia effectively introduced prohibitive export duties on grain to protect its domestic market in the conditions of the rapid price increases, but they were canceled in the summer of 2008. In April it imposed export duties on mineral fertilizers. However, bargaining with Russia may fail because that country has its own very effective argument – gas.