Bridges Trade BioResVolume 12Number 21 • 17th December 2012

New Report Highlights Need for Effective Resources Governance

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Reliable and stable access to the planet’s commodities and natural resources is increasingly becoming a thing of the past, according to a new report by UK-based think-tank Chatham House. The report identifies a “new normal” with regard to difficulty accessing key commodities and resources - including food, minerals, and energy - and suggests the trend is likely to continue, particularly as emerging economies continue to grow rapidly.

The report, entitled “Resources Futures,” outlines the production, trade, and consumption of key raw materials, and its accompanying “interactive tools” illustrate these trends on a product-by-product basis. Only eight countries - China, the United States, Australia, the European Union, Brazil, Russia, India, and Indonesia - are the dominant players with regard to 19 key resources, including crops, timber, fish and meat, metals, fossil fuels, and fertilisers. Certain resources are even more concentrated, such as the production of palm oil in Indonesia and Malaysia. Meanwhile, production is also moving to new locations, such as Angola, Mongolia, and Mozambique.

The “resource crunch” risks leading to situations of conflict over resources. The pressure tends to focus both on governments to provide for the citizenship - as seen in the cases of unrest following rising food prices - and between governments with strategic interests in the same resources. At the same time, the global impacts of climate change and water scarcity are adding to the complexity of the problems. Solutions will need to include cooperation, resource efficiency and productivity. Most of all, they cannot be blind to the political economy of natural resources, according to the report.

Export restrictions not the solution

The Resources Futures report provides a strong focus on the role of trade policy within this new dynamic. “Trade is becoming a frontline for conflicts over resources - at a time when the global economy is more dependent than ever on trade in resources,” the report reads. The use of export restrictions has grown in recent years, which has led to further volatility. For example, global food price spikes in 2008 and 2011 were exacerbated when key producers started to restrict exports. Since producers were not able to benefit from high international prices, the investment climate remained sub-optimal, especially as price fluctuations added risk to the sectors affected. Fresh examples of restrictions come from Indonesia, which has legislated to tax or restrict exports of several unprocessed minerals.

The report warns against disputes around resources overwhelming the WTO. “There is an urgent need to develop confidence-building measures that will increase transparency and predictability on the use of export controls and other restrictions, especially in the midst of a commodity price crisis,” according to the authors.

Club of 30 could bring stability

In order to tackle resources-related challenges, the Resources Future emphasises four areas of action: fostering new leadership; reducing vulnerability to short-term shocks; investing in sustainable production and resilience; and re-invigorating rule-based governance.

“We believe that confronting hard price volatility upfront is a major insurance policy for the global economy,” said Bernice Lee, a research director at Chatham House and the study’s lead author.

In terms of leadership, the Chatham House team recommends that a new informal group be established to provide guidance on resource scarcity and governance. The group would include representatives of the 30 countries most prominently involved in the production, consumption, trade, and management of the world’s key resources. This Resources 30 group could then tackle specific issues in a proactive way, with their advice and solutions feeding into existing institutions such as the International Energy Agency (IEA), WTO, and G20.

ICTSD Reporting; “Governments must tackle sharp commodity price swings -think tank,” REUTERS, 10 December 2012; “Nationalism threat to resource prices,” FT, 10 December 2012.

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