China's Rares Cooking Up a Storm

[Joecoolyo]

US, EU and Japan challenge China on rare earths at WTO

The US, Japan and the European Union have filed a case against China at the World Trade Organization, challenging its restrictions on rare earth exports.

US President Barack Obama accused China of breaking agreed trade rules as he announced the case at the White House.

Beijing has set quotas for exports of rare earths, which are critical to the manufacture of high-tech products from hybrid cars to flat-screen TVs.

It is the first WTO case to be filed jointly by the US, EU and Japan.

They argue that by limiting exports, China, which produces more than 95% of the world's rare earth metals, has pushed up prices.

The co-ordinated complaints are the first step in a process that could ultimately lead to sanctions against China.

In the press conference, Mr Obama also said his new trade enforcement unit - which he established last month, with China the primary target - was ramping up its operations.

"When it is necessary, I will take action if our workers and our businesses are being subjected to unfair practices," Mr Obama added.

Beijing has denied the allegations in the WTO case, saying that it enforced the quotas to ensure there was no environmental damage caused due to excessive mining.

The filing focuses on 17 rare earth minerals which are essential for making products such as smart phones and camera lenses, as well as many renewable energy devices.

The rare earth complaints follow a WTO ruling earlier this year in favour of the EU. It found China had illegally restricted exports of other materials, such as bauxite, zinc and magnesium.

"Despite the clear ruling of the WTO in our first dispute on raw materials, China has made no attempt to remove the other export restrictions," said EU Trade Commissioner Karel De Gucht.

"This leaves us no choice but to challenge China's export regime again to ensure fair access for our businesses to these materials."

http://www.bbc.co.uk/news/business-17348648

Interesting news, did not realize 95% of rare earth materials lay in China.

Anyways, I'm no expert on international trade, so I can't express any sort of opinion about this.

Instead, I'll just ask some generic questions to our resident experts. Will this succeed? What will the ramifications be of success? How will sanctions affect China's economy (and the world's) if put into action? Will this hurt Obama politically?

 

[Cutlass]

We should just reopen the mines we have. They aren't the only source. Just the only current source.

 

[Quintillus]

http://www.bbc.co.uk/news/business-17348648

Interesting news, did not realize 95% of rare earth materials lay in China.

Anyways, I'm no expert on international trade, so I can't express any sort of opinion about this.

Instead, I'll just ask some generic questions to our resident experts. Will this succeed? What will the ramifications be of success? How will sanctions affect China's economy (and the world's) if put into action? Will this hurt Obama politically?

95% of production, not reserves. Though they may have more reserves of some rare earth minerals, too, that isn't the case across the board.

I don't think the trade case will have much of an impact, but I don't know that much about international trade, either. What will happen, if shortages do occur or prices go up, is that other countries will begin (or increase) their production of rare earth minerals. That might take awhile, though, so stock up on smartphones now!

I don't think it will seriously hurt Obama politically unless he wins another term. Then he might be president long enough for this to be a more serious issue.

 

[Arwon]

There's a lot of reserves in Australia, too.

Masada posted at one point that there's a price ceiling below which China can have a virtual monopoly, but if the prices go any higher other mines elsewhere become competitive. If i'm remembering that right.

 

[Oerdin]

Is China attempting to restrict supply as a way to strong arm companies into relocating factories in China? Yes, they even admitted to it back in 2009 when they started restricting supply. That said, the solution is simple, open up more mines for REEs outside of China. Now, the real problem is China heavily subsidized its own state owned mining companies who produce REEs, caused prices to collapse and foreign mines to shut down, then they restricted supply and jacked up prices. It's classic predatory dumping and this isn't the only industry China plays this game in; they do it in just about every industry they can.

They also go to extreme lengths to block foreign imports to protect their domestic market, manipulate their currency to make their exports cheaper (and thus increase jobs in China while other countries lose jobs), and still slap a 50% tariff on things like foreign made cars. They are not a fair trade partner and we need to fight back.

 

[civ_king]

http://www.bbc.co.uk/news/business-17348648

Interesting news, did not realize 95% of rare earth materials lay in China.

Anyways, I'm no expert on international trade, so I can't express any sort of opinion about this.

Instead, I'll just ask some generic questions to our resident experts. Will this succeed? What will the ramifications be of success? How will sanctions affect China's economy (and the world's) if put into action? Will this hurt Obama politically?

The world should shun China for this and related douchebaggery

 

[Arwon]

In that case, probably the United States too, for its own protectionist and anti-competitive behaviour, its strong-arming over free trade deals and intellectual property.

Won't happen though.

 

[BasketCase]

The world should shun China for this and related douchebaggery

Don't worry, China is already in the process of shooting itself in the butt. Its economic growth is suffering some serious slowdown right now (in fact I think their trade surplus has actually turned around and become a deficit!), and China is now having to consider reversing many of the protectionist policies that got it to where it is.

China's headed for some serious economic hurt down the road.

 

[Speedo]

Interesting news, did not realize 95% of rare earth materials lay in China.

They don't. Other mines worldwide have shutdown because they couldn't compete with China's pricing.

 

[Joecoolyo]

We should just reopen the mines we have. They aren't the only source. Just the only current source.

95% of production, not reserves. Though they may have more reserves of some rare earth minerals, too, that isn't the case across the board.

They don't. Other mines worldwide have shutdown because they couldn't compete with China's pricing.

Yeah, I really need more sleep. I've been misreading and forgetting a lot of things today

 

[amadeus]

The co-ordinated complaints are the first step in a process that could ultimately lead to sanctions against China.

Remember, if you can't change China's policies, you can always hurt Americans through tariffs and import quotas! Way to go, WTO!

 

[GenMarshall]

If Red China is gonna hold a monopoly on these minerals. Then we should open up our own mines!

 

[Theige]

If Red China is gonna hold a monopoly on these minerals. Then we should open up our own mines!

We're re-opening lots, iirc.

 

[LucyDuke]

Major player corners the market then screws everyone. Who could possibly have seen this coming.

 

[Mise]

It's not much different to OPEC.

 

[Monsterzuma]

(in fact I think their trade surplus has actually turned around and become a deficit!)

yes, but this turnaround always happens in Februari, because a lot of Chinese go on holiday around that time:

http://www.cepr.net/index.php/blogs/beat-the-press/chinas-trade-deficit-always-rises-in-february

 

[Riffraff]

I think this is a bigger deal than some think here, you can't simply 'open up mines' on moments notice. If the price of these go up and other countries decide to tap their reserves, they will still be at China's mercy for years to come.

 

[Monsterzuma]

the greater the strain on the global market becomes, the greater the profit China can take by lifting (part of) the restriction. sooner or later they can be expected to cave. i don't think it's too big a deal.

 

[Riffraff]

the greater the strain on the global market becomes, the greater the profit China can take by lifting (part of) the restriction. sooner or later they can be expected to cave. i don't think it's too big a deal.

True, but what if motives other than simply making money come into play?

 

[Shaihulud]

I would keep something that i posseses in large quantity, rare. I see nothing wrong with Chinas strategy. Its a fine line, but humans don't need so many electronic equipment at such low cost.