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Indonesia wants more than a nickel for natural resources



Excavators sit idle in a nickel-mining area on the hill of Pomala village in Southeast Sulawesi province, Indonesia, 2 September 2012. (Photo: REUTERS/Yusuf Ahmad)

Author: James Guild, RSIS

Indonesian Minister of Investment Bahlil Lahadalia suggested that Indonesia is looking into forming an OPEC-style cartel for nickel and other inputs used in battery production. Nickel is becoming a hot commodity as it is a key input in the manufacture of lithium-ion batteries needed for electric vehicles (EVs) — and Indonesia has the world’s largest nickel ore deposits.

Given that demand for EVs is expected to balloon in the coming years, countries rich in natural resources are exploring the most expeditious ways to capitalise on the situation.

The idea for an OPEC-style cartel reflects the Indonesian authorities’ desire to leverage its control over a scarce and highly sought-after commodity. They seek a more favourable position on the global technological frontier. Indonesian officials are discontent with the relatively low-value activities of extracting and exporting raw commodities. They want more of the value added during processing and manufacturing. Such value has historically been captured outside of Indonesia.

This was the logic behind a series of recent nickel ore export bans — a strategy that catalysed billions of dollars of investment in Indonesia’s downstream nickel processing industry. With mining and smelting activities increasingly localised, several leading global technology companies have made sizable commitments to invest in battery and EV production in Indonesia. At least in the near-term, the decision to deprive global markets of unprocessed nickel ore achieved its objective of accelerating investment in higher value-added economic activities.

Talk is turning towards building on that success by scaling it up to the level of an OPEC-style cartel. This will allow Indonesia to exercise a greater degree of control over supply and price and maximise economic benefits. It is early days and seems more like a trial balloon than anything, so there are reasons to approach such an idea with caution.

One reason the nickel export bans are working is because they are limited in scope and have a narrow, clearly-defined objective — more downstream investment in Indonesian nickel smelters will lead to more investment in battery and EV production. A global cartel of nickel-producing countries would be much more complex, difficult to organise and could be undercut at any time by a single member or simply by the vagaries of the market.

Not every nickel-producing country is going to have — or be able to achieve — the same objective. This could easily make any such undertaking unwieldy. Canada, a major nickel producer, has already indicated that it would be very unlikely to participate in any such scheme.

Another potential deterrent is that intentionally restricting supply to drive up prices incentivises actors to invest in developing alternative technologies. It would be a big gamble for Indonesia to assume that batteries will always be dependent on nickel. If the price is too high and supply chains become excessively politicised, companies will start looking to develop batteries without nickel — a process that is already underway. An OPEC-style cartel risks accelerating this process while alienating trade and investment partners in the process.

The downside of alienating partners for short-term economic gain is also worth considering. Though Indonesia has nickel, it cannot manufacture batteries or EVs without the technology and know-how from mature industry players like China’s CATL, South Korea’s LG Group or Japanese automakers. Indonesia needs their assistance to move up the value chain as much as they need Indonesia’s nickel.

Resource-rich emerging markets like Indonesia have a long history of exploitation by more mature economies, particularly in extractive industries. Indonesia is asserting itself in a more muscular form of economic nationalism as a response, at least in part, to these historical imbalances. This was evident in the blanket export bans on palm oil and coal in early 2022, as high global prices threatened domestic shortages. It is also evident in the way that Indonesia brushed off a World Trade Organization ruling that the nickel ore export ban violates Indonesia’s commitments under the General Agreement on Tariffs and Trade.

The Indonesian government is not afraid to leverage its control over in-demand commodities to achieve important economic objectives. More than anything, Minister of Investment Lahadalia is sending a message about Indonesia’s willingness to intervene in markets and buck the principles of free trade when it is in…

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Fixing fragmentation in the settlement of international trade disputes



Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.

Fragmentation in Global Trade

Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.

Challenges with WTO Dispute Settlement

The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.

The Path Forward for Global Trade

Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.

Source : Fixing fragmentation in the settlement of international trade disputes

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WTO ministerial trading in low expectations and high stakes



The WTO’s 13th Ministerial Conference is set to focus on e-commerce transparency, investment facilitation, and admitting new members. However, progress may be hindered by disputes, especially regarding fisheries subsidies.

The World Trade Organisation’s 13th Ministerial Conference

The World Trade Organisation’s (WTO) 13th Ministerial Conference is set to take place in Abu Dhabi on 26–29 February, with expectations of deals on electronic commerce transparency, investment facilitation for development, and the admission of Timor Leste and the Comoros as WTO members. Despite these positive developments, the expectations are relatively modest compared to promises made at the 12th Ministerial Conference, which included addressing fisheries subsidies and restoring a fully functioning dispute settlement mechanism by 2024.

Challenges in Dispute Settlement and Agricultural Trade Reform

However, challenges remain, especially in the deadlock of dispute settlement since December 2019 due to a US veto on the appointment of Appellate Body judges. Progress in restoring the dispute settlement mechanism has stalled, and discord continues regarding India’s grain stockholding policy as a potential illegal subsidy. Restoring a fully functioning dispute settlement mechanism hinges on addressing US concerns about perceived bias against trade remedies in relation to China’s state subsidies.

Geopolitical Tensions and the Future of Trade Relations

The likelihood of reaching agreements amid geopolitical tensions between Western democracies and China appears slim, with issues surrounding subsidies and global supply chains causing rifts in trade relations. As nations focus on self-reliance within the global value chain, opportunities for trading face obstacles. Advocacy for open markets and addressing protectionist sentiments remains crucial for fostering resilience to external shocks and promoting economic growth.

Source : WTO ministerial trading in low expectations and high stakes

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Getting Vietnam’s economic growth back on track



Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.

Vietnam’s Economic Roller Coaster

After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.

Trade Performance and Monetary Policy

Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.

Challenges and Prospects

Vietnam’s economy suffered from delayed public investments, electricity shortages, and a declining domestic private sector in the last two years. Looking ahead to 2024, economic growth is expected to be in the range of 5.5–6 per cent, but the country faces uncertainties due to geopolitical tensions and global economic conditions.

Source : Getting Vietnam’s economic growth back on track

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