“You don’t miss your water ‘Til your river runs dry”: Regulating industrial supply shortages after “China raw materials”

Abstract

Global industrial production depends on stable access to raw inputs. Food price volatility has emerged as a major concern for Group of Twenty Finance Ministers and Central Bank Governors (G20), while we are hearing new calls for bringing global disciplines to resource cartels like the Organization of the Petroleum Exporting Countries (OPEC). Supply chains that make up globalized production recently demonstrated their potential fragility when Chinese sovereign intervention threatened to bring Japan's high-tech manufacturing to its knees by cutting off its supplies. These wide-ranging issues are now being addressed under the umbrella of trade regulation. As a result, we are witnessing a shift from the old trade regulatory model of the past six decades - where trade negotiators focused on import barriers and reciprocal concessions and export restrictions were justified typically on grounds of national security and foreign policy - towards the realization of an increasing need to tighten global rules on export restrictions. Although commodity and resource prices are at least partly market- driven, sovereign intervention has finally emerged as a clear concern. The Obama Administration's first suit brought before the World Trade Organization (WTO) concerned Chinese export restrictions on nine commodities, including magnesium, coke, yellow phosphorus, and zinc, and]esulted in victory. Yet real General Agreement on Tariffs and Trade (GATT) disciplines on export price measures, quotas and other conditions have been sparse.