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Recently there has been a lot of publicity over the smuggling of ferro alloys of Chinese origin, which comes as no surprise to seasoned observers of world trade in ferro alloys.
Over the last 5 years, there has been a trend by governments and trading blocs all over the world to increase export quotas, export tariffs and anti dumping duties, but the affect is particularly felt in China.
China has attempted to reduce the export of energy intensive materials like ferro alloys through higher export tariffs. For example, the export duty for Manganese Metal is 20% and Ferro Silicon is 25%, when just a few years ago most ferro alloys from China had export incentives and rebates. During the same period, after lengthy investigations, the EC continued to increase anti dumping duties. For example in 2008, despite the E.U. needing to import 70% of its Ferro Silicon requirements, duties of up to 35% were imposed during a time of record high prices!
The result of these major policy changes is very disruptive to world markets. Just as higher taxes increase tax evasion, higher duties have resulted in increased smuggling, either through disguised or relabelled product or re-export via neighbouring countries such as Vietnam, Korea and Taiwan.
Recently the EC began investigating suspected Chinese Silicon imports via Taiwan, and has already applied dumping duties on suspected Chinese origin silicon imports from South Korea, which has no domestic silicon production.
What is clear is that until governments and trading blocs reduce tariffs and stop making arbitrary decisions that serioulsy disrupt markets and investment decisions, the World Trade Organisation will struggle to bring the benefits of free trade to world markets.
What do you think about trade barriers and free trade?
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