Is free trade in minerals a myth

Central governments are influencing the location of metal mines and processing units and their resultant international trade flows. They are doing so through a combination of special arrangements--export performance requirements and develop-for-import commitments--and linked special incentives to encourage fulfilling their commitments. These special incentives--subsidies, tax and investment credits and import entitlments--interfere with the orderly functioning of international market forces, just as more direct quotas and subsidies. Because many central governments apply export performance requirements on a case-by-case basis, without publicity, it is nearly impossible to estimate the share of world trade in metals currently subject to export performance requirements and their related incentives. Develop-for-import commitments, on the other hand, are publicized. The share of world trade in metals covered by develop-for-import commitments can be estimated. As export performance requirements are complemented with special incentives so too are develop-for-import commitments. Those willing to undertake develop-for-import ventures receive subsidized credits and loans. The share of metal trade covered by develop-for-import commitments is still a minor part of world trade, but if current trends continue, the share will rise significantly. The combined effect of export performance requirements and develop-for-import arrangements is to diminish the portion of metals trade responsive to international market forces.more » In other words, international trade in metals is becoming less competitive day by day as subsidies and subsidy-like incentives distort and blunt the free play of international market forces to serve the needs of central governments.« less