Mineral beneficiation leapfrogs exports
China the test case for WTO action on potential violation of its obligations
DURING October last year the World Trade Organisation’s (WTO) dispute resolution panel concluded that export restrictions imposed by China in respect of certain rare earths (minerals) violated international trade law. China controls approximately 90% of the world’s market for rare earths, which are essential minerals for the manufacturing of high-tech electronic equipment (ie smartphones, computers, wind turbines, missiles etc). As a result of the restrictions on the export of rare earths their prices increased dramatically.
Japan, the US and the European Union petitioned the WTO during 2012, stating that Chinese export duties, export quotas, and restrictions of rare earths violated certain provisions of the General Agreement on Tariff and Trade and China’s 2001 accession agreement to the WTO. China responded to the allegation stating, amongst others, that the restrictions improved economic development in China and protected its natural resources. The written ruling of the WTO dispute resolution panel has not yet been formally released to consider in detail.
The proposal by the South African government to restrict the export of minerals, mineral products or petroleum designated by the minister of mineral resources for local beneficiation, as currently contained in the draft Amendment Bill to the Mineral and Petroleum Resources Development Act No 28 of 2002 (mineral act), may also be deemed as a violation of SA’s international trade obligations and open SA up to possible complaints at the WTO similar to China.
The current proposal implies that a mineral designated by the minister (whether coal, manganese, iron ore etc) may not be exported until such aggregate of raw minerals as determined by the minister and subject to the differentiated price has been made available to local beneficiators.
It is an offence for a person to export such a designated mineral without meeting the domestic quota of the mineral for local beneficiation or without the written consent of the minister. On conviction this could result in imprisonment or a penalty of 10% of a company’s annual turnover.
The South African proposed amendments to the mineral act to restrict the export of designated minerals to ensure the local beneficiation of a certain percentage thereof is not unique to SA, as a number of other resource-rich countries are also considering such restrictions or have already implemented restrictions. Indonesia (the world’s 16th largest economy by nominal GDP and a resource-rich country) has also recently adopted legislation which came into effect on 12 January this year prohibiting the export of raw minerals or ore to ensure that such minerals are beneficiated locally to improve economic
It is an offence for a person to export such a designated mineral