The Asia Pacific Economic Cooperation forum – APEC ‑ has

lost its way so badly that apart from its annual silly-costume photo-opportunity

summit, it seldom rates more than a yawn. Its 21 member economies, stretching

from Canada and Peru to New

Zealand via Russia,

China, Japan, Hong Kong

and ASEAN, are so disparate that few believe cooperation can go much beyond

minor trade facilitation.

But last week a meeting in Perth, Australia,

suggested that the group just might have found a rather bigger trade niche. The

event passed almost unnoticed by regional and global media but it might end up

being more significant than the much-ballyhooed APEC November summit in Vietnam.

Mining ministers from APEC member countries agreed to

explore establishing free trade in metals and minerals among members. They

agreed that free trade and open and predictable investment policies are in the

interest of both exporters and importers and would help minimize price swings.

If it comes to pass it would amount to the world’s largest

single FTA (free trade agreement). It would “dwarf every other FTA in existence,”

according to Australian Resources Minister Ian Macfarlane.

The obstacles are many. Translating a multinational agenda

into national policies will be difficult. However, it is not impossible. The

APEC membership may be disparate but it dominates global production of most

non-oil energy and minerals. Look at the list: Australia

and Canada, with coal, iron

ore, copper, nickel, aluminum, zinc, uranium, lead, gold and platinum, plus Russia

with a similar long list and a host of lesser minerals from antimony to zirconium.

The US, too, has a wide range of natural resources, some of

which are exported, and even the South American APEC members weigh in with big

contributions to global output of minerals such as copper from Chile and silver

from Mexico and Peru. ASEAN members and Papua New Guinea continue to play

major roles in copper, tin, nickel and lesser minerals like tantalum and

tungsten. China

dominates global coal production and is big in various rare-earth minerals. Indeed,

apart from South Africa and Brazil,

the APEC group includes almost every major exporter of every major metal and

non-oil mineral.

APEC is not quite so big a player on the import side. But

the advanced economies of East Asia – Japan,

Korea and Taiwan – are

almost wholly dependent on imports of almost every mineral. As a group they vie

with the EU as the world’s biggest importers. China, of course, is the new

elephant on the block with a voracious appetite for raw materials. And the US

remains a big minerals importer as well as exporter.

So can this group find common ground? Is it in their

interest to cooperate on free trade, not to mention more difficult areas such

as common environmental practices and freedom to invest?

Would an FTA actually make much difference anyway? The

importing countries generally have zero or very low tariffs on minerals, and

mostly low ones on metals. As for the exporting nations, some use export

tariffs as a means of raising revenue so they are going to be reluctant to

abolish them. However, many countries already use production royalties, sliding

tax rates and other revenue raising devices rather than tariffs.

Some exporters impose volume restrictions for a variety of

reasons ranging from national security to fears of depressing global prices.

(In the first flush of opening up, China’s output of various minerals

soared, causing prices of some, for example wolfram, to collapse.) But the Perth meeting did agree

that export restrictions should only be employed in “exceptional circumstances”

and according to World Trade Organization rules.

The biggest problem looks to be the determination of some

larger countries to keep import tariffs high so as to prevent domestic mineral

production from being swamped by imports from lower-cost regions. Another

obstacle is the use of energy and other subsidies to protect output for export

from foreign competition. Russia

is a case in point where energy costs are held far below international levels.

There is plenty of reason for skepticism about the group’s

chances of moving to a minerals FTA. Russia, for example, has yet to

join the WTO and its minerals sector is still far from being driven by open

market principles. Despite this, it will chair a Working Group to advance

cooperation.

Nor will freer trade necessarily lead to freer investment

flows. Indeed, after a period when resource nationalism was on the wane almost

everywhere, there are signs of resurgence. China’s

search for mineral investments in Africa has already resulted in some negative

local reaction and the same might be expected in countries such as the Philippines, Peru

and Vietnam.

Meanwhile foreign investors are barred from China’s

mineral sector and face obstacles in Russia.

The Perth

meeting also aimed to raise environmental standards – though this is likely to

prove difficult given varied mining conditions and the vulnerability of the

environment to mining and ore treatment.

However, the APEC push for free minerals trade and

investment is a reminder that after years of relative neglect the benefits of

mineral exploitation for developing countries are being again recognized as

prices move higher due to the surge in global demand caused by rising living

standards in China, India and other developing regions.

Asia Sentinel

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