Pitfalls of resource nationalism flagged

‘As countries and companies compete for critical minerals in the green energy transition, in which battery metals – cobalt, graphite, lithium, nickel and manganese – are crucial, host states in Southern Africa are resorting to export controls on unprocessed critical minerals. These are principally intended to bolster the host state’s control over its mineral patrimony, compelling mining companies to engage in domestic beneficiation.’ So says Peter Leon and Natasha Rachwal from Herbert Smith Freehills, noting export controls include prohibitions on the export of unprocessed minerals or quotas on the quantities that may be exported. In June, the Namibian Government approved the prohibition of the export of unprocessed critical minerals – including lithium ore, cobalt, manganese, graphite and rare earth minerals. This follows a similar development in Zimbabwe, which banned the export of unprocessed lithium in December. Writing in Business Day, the authors say resource-rich countries in Southern Africa ought to be aware of the consequences of contravening their international trade law obligations under the World Trade Organisation’s (WTO) 1994 General Agreement on Tariffs & Trade (Gatt). ‘Of particular importance in this regard is article XI:1 of the Gatt, which prohibits WTO member states from maintaining or imposing prohibitions or restrictions on the export or sale for export of products.’

Leon and Rachwal note the application of article XI to export controls on unprocessed minerals was recently assessed by the WTO panel in its Indonesia – measures relating to raw materials decision, delivered in November. The panel concluded that Indonesia’s imposition of measures prohibiting the export of nickel ore, and requiring that nickel ore be processed domestically, contravened article XI:1 of the Gatt. The authors argue Indonesia failed to demonstrate the existence of an imminent, critical shortage of nickel ore, and the panel concluded that neither the export ban nor the domestic processing requirement was exempt from article XI:1. They note the panel recommended Indonesia bring its export regime into conformity with its Gatt obligations. Indonesia appealed to the appellate body on 8 December. This decision joins several other panel and appellate body decisions that have grappled with the ‘WTO compatibility’ of member states maintaining export restrictions on critical minerals. The authors conclude: ‘While there are important consequences from the panel’s decision on whether the types of export control measures adopted by mining jurisdictions contravene countries’ Gatt obligations, the effect is tempered by the fact that in light of Indonesia’s appeal to the appellate body, the WTO dispute settlement body cannot adopt the panel report, and as such the report does not yet have formal legal status. This is particularly problematic as the appellate body remains inquorate after the expiry of the terms of two of the three remaining members in December 2019.’