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Distortion effects of export quota policy: an analysis of the China raw materials dispute

Author

Listed:
  • Sarah Guillou

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Christophe Charlier

    (UNS - Université Nice Sophia Antipolis (1965 - 2019))

Abstract
The China-Raw Materials dispute recently arbitrated by the WTO opposed China as defendant to the US, the EU and Mexico as the claimants on the somewhat unusual issue of export restrictions on natural resources. For the claimants, Chinese export restrictions on various raw materials, of which the country is a major producer, create shortages in foreign markets increasing the prices of these goods. China defends export limitations by presenting them as a natural resource conserving policy. This paper offers a theoretical analysis of the dispute with the help of a model of a monopoly extracting a non-renewable resource and selling it on both the domestic and foreign markets. The theoretical results focus on the effects of imposing an export quota on quantities, prices and price distortion. Given the crucial importance of demand elasticities in this theoretical understanding of the conflict, the empirical part of the paper provides estimates of import demand elasticity of the parties for each product concerned in the case. The model and the empirical results challenge the ideas that an export quota always favors conservation of natural resource, that a higher foreign price necessarily follows this policy and that it inherently increases price distortion and therefore discrimination.

Suggested Citation

  • Sarah Guillou & Christophe Charlier, 2014. "Distortion effects of export quota policy: an analysis of the China raw materials dispute," SciencePo Working papers Main hal-03411761, HAL.
    • Handle: RePEc:hal:spmain:hal-03411761
    DOI: 10.1016/j.chieco.2014.10.004
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    References listed on IDEAS

    as
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    Cited by:

    1. Seiler, Volker, 2024. "The relationship between Chinese and FOB prices of rare earth elements – Evidence in the time and frequency domain," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 160-179.
    2. Ronen, Eyal & Dawar, Kamala, 2016. "How Necessary? A Comparison of Legal and Economic Assessments GATT Dispute Settlements under: Article XX(b), TBT 2.2 and SPS 5.6," MPRA Paper 83834, University Library of Munich, Germany.
    3. Proelss, Juliane & Schweizer, Denis & Seiler, Volker, 2020. "The economic importance of rare earth elements volatility forecasts," International Review of Financial Analysis, Elsevier, vol. 71(C).
    4. Seiler, Volker, 2021. "China-to-FOB price transmission in the rare earth elements market and the end of Chinese export restrictions," Energy Economics, Elsevier, vol. 102(C).

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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade

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