US, EU, Japan Complain To WTO Over China's Rare Earth Ban 218
eldavojohn writes "China's rare earth monopoly has resulted in a shortage as China blocks their export and the rest of the world resumes their operations. Now, in a first-ever joint filing from three members of the World Trade Organization, Japan, the EU and the U.S. are not sitting idly by as China repeatedly ignores the WTO's orders to export rare earth metals and raw materials at a fair price to other countries. China claims the embargoes are in place to protect its environment, while Obama denounces China as being unfair and not playing by the rules of the WTO. In 2009, the WTO released a report (PDF) that explained how actions like China's hurt trade partners."
Re:Bogus article (Score:0, Informative)
Re:Globalist whining -ignored unless they agree (Score:2, Informative)
For a good look at this compare to the US ignoring NAFTA (even though they were its champions) when US sought tariffs against Canadian companies that they alleged were 'dumping' softwoods even though the terms of NAFTA supported the Canadians.
http://en.wikipedia.org/wiki/Canada%E2%80%93United_States_softwood_lumber_dispute
Or how Bush, Cheney and Rumsfield will never face international war tribunals for authorizing the same tortures that we executed Japanese commanders for proscribing:
http://www.cbsnews.com/2100-250_162-3554687.html
-I'm just sayin'
It's not about mining quotas, but export quotas. (Score:5, Informative)
If China were simply limiting the amount of rare earths permitted to be dug out of the ground, there would be no WTO issue. The problem is that this is an export cap which has the potential to create different pricing for rare-earths between domestic and foreign purchasers of these materials.
Now if you look at mentions of today's prices of rare earths (by googling for "rare earth prices"), as yet, there is no such disparity. The linked WTO article also doesn't directly talk about price disparities between domestic and foreign purchasers. It turns out that global demand for rare earths went down quite a bit last year, and as a result, only about 60% of the export quota was used up (according to this FT article [ft.com]).
The concern is that as the global economy recovers, if demand is seen to exceed the quota, then a huge price difference between what domestic companies and foreign companies pay will emerge. This would amount to a kind of state subsidy (making prices for domestic producers artificially cheap) and would violate WTO rules.
The two metrics to watch to determine whether or not the claim of environmental protection vs. economic protectionism would be:
(1) Domestic rare earth production volume (e.g. in tons) - If slope of this curve continues unchanged, then there really is no environmental effect. If the slope flattens out, then it could be argued that the quota did slow down the pace of mining and did have an environmental consequence
(2) Domestic (China buyer) vs. Foreign (non-China Buyer) price (e.g. difference $/ton) - If this disparity is big, then there's a stronger case that there is some kind of domestic subsidy occurring, if the disparity is small, then the case that there is a subsidy is weaker.
This is not really a matter of sovereignty since China is a willing party to the WTO and has volunteered to play by those rules.
Re:Bogus article (Score:5, Informative)
The first part involved the actual dumping and eliminating competition.
Indeed. For many years there were multiple export nations selling Rare Earth Minerals. For many years, as the demand was quite low they all sold their goods to a small market. However, when the demand started to rise, China did something that the other players didn't see coming. They started to seriously undercut the prices of competitors. Other mines such as Mountain Pass [wikipedia.org] were run out of business - and due to political pressures on the environmental damage that was being caused. When China became pretty much the only place left selling any reasonable quantities of REM, they bumped the price up by orders of magnitude. This coupled with much higher (and still growing) demand for them makes it a wonderful masterstroke. They then further used it when an incident with Japan caused political turmoil between the two nations - by blocking sales to Japan [nytimes.com] completely.
While it is possible (and being done) to re-open the old mines and cease the monopoly that is currently held, it takes time to get these things up and running. Even then, China does hold a very major share of known REM reserves, so unless another (very) major deposit is found, it is likely that China will continue to hold an interesting political/trade card to play whenever it wants to.
Re:Globalist whining (Score:5, Informative)
I am not a Chinese government fan by any means but as a sovereign country they have an obligation to protect the interests of their citizens above the financial gains of the globalists.
They absolutely do, but they can't do that while still remaining a member of WTO.
Re:Slightly delusional (Score:5, Informative)
If they had to go to war tomorrow, they have a significant high-tech air-force, navy and army with a modern capable war doctrine. If engaged in a protracted war, like WWII, they could draw down on over 50 million personal, and deploy a massive high tech manufacturing base and indigenous know-how. They are also the 3rd richest country in the world. (Most of their debt is domestically held.)