The US, the European Union (EU), and Japan have taken China to task for restricting the trade of rare earth minerals. In a statement on fair trade, President Obama said that the US was bringing a trade case against China, aided by Japan and the US's European allies.
Obama couched the action with the World Trade Organization (WTO) in terms of America's manufacturing robustness, or rather, in terms of its lack of robustness, because rare earth materials are needed by US manufacturers to produce a variety of technology-based products, such as batteries for cell phones and hybrid cars.
President Obama announces a World Trade Organization action to enforce U.S. trade rights with China regarding rare earths and other materials, March 13, 2012. (Source: Official White House photo by Pete Souza)
"We want our companies building those products right here in America," said Obama. "But to do that, American manufacturers need to have access to rare earth materials -- which China supplies. Now, if China would simply let the market work on its own, we’d have no objections. But their policies currently are preventing that from happening. And they go against the very rules that China agreed to follow. Being able to manufacture advanced batteries and hybrid cars in America is too important for us to stand by and do nothing. We've got to take control of our energy future, and we can’t let that energy industry take root in some other country because they were allowed to break the rules."
The nearly identical requests for consultation from all three entities formally initiate a dispute within the WTO. The disputes are followed by consultations, which are discussions under the WTO's dispute settlement system. The expectation is that the parties will find a solution without having to resort to litigation. But if consultations fail to resolve the dispute after 60 days, the initiators of the complaint may request a panel's judgment.
It is a breath of fresh air to see that we still have someone that is not afraid to say as it is. we should enforce same tarrifs on imports as they do. Then they will drown in their junk. Only then we will be respectful and trade will be fair.
North Carolina had two operations which closed when lower cost foreign supply came online, but can be re-opened easily and their estimated combined reserve is 230,000 tonnes! And that is just NC, there are many other reserves in USA.
So, apparently the situation is not different than with the "rare" earths.
I have to applaud the Chinese. The U.S. is a nation of fools governed by idiots and the Chinese take advantage of that. Our absurd "environmental" regulations and punitive taxes make us an easy mark. I think it would be morally wrong for the Chinese to not take advantage of us.
China and the U.S. have squared off, and continue to do so in areas such as automobile tires and now solar panels, where government subsidies to those industries allow lower prices on those exports. Also, as far as the solar panels are concerned, there is the possibility that these are being "dumped" on U.S. shores at under production costs, which is usually done to eliminate competition by forcing competitive companies into folding under such pressure. As these products hit our shores, they need to be "readjusted" by use of tariff's and taxes to bring them into a "fair" line with U.S. and other country imports that do not receive such subsidies. Currently the U.S. has only levied tariffs of a minimal 2.9-4.73% on these panels(which is minimal and will have a limited effect on current U.S. markets - according to the NY Times).
This action is just part of China's retaliation against those tariffs. China has stated that they are not holding back on exports to stifle the competition, but because they need to be Green Friendly and mass production of these rare earth minerals brings about increased pollution and environment destruction. The U.S. disagrees as this is in opposition to other current manufacturing and mining practices in China. The U.S. is not buying this excuse, but that is their story, and they are sticking to it.
With all the U.S. debt that China holds, it appears that they feel they have the right to toss their weight around, and to expect little repercussions. The U.S. tries to play fair (in comparison) in the world trade market, even as this has eroded our current manufacturing. China has seen this, and is looking to take advantage of this as they can. Entry into the WTO was a way for them to continue but with the illusion of compliance. Oversight is necessary to maintain stability of the WTO. Actually, where would the WTO be without the U.S.?
Expect this to only get worse, as competition increases from other countries as they emerge with technology and human resources to provide products at 2nd and 3rd world prices.
Dont you see how absurd this is? The statement that we have to rely on rare earths from China to operate our electronics industry demonstrates a great weakness in the US electronics supply chain (Just ask the Defense Logistics Agency). The new US policy has been that we will give dollars to other countries to dig up rare earths, but we will not dig up our own. So we take them to court? That's our solution? Will the court case end up costing the same as the price to expand Mountain Pass? The only thing China fears is that we will dig up our own rare earths and challenge their REE dominance. Instead of suing them, we should thank them for showing us we need to break out the shovels, create mining jobs, so that the materials processors will move back near the materials source, and the component and sub-assembly manufacturers will follow.
Beth, there is another series of articles on this site by Kristin Lewotsky regarding shortages of rare earth minerals. The Wall Street Journal has also had articles about this subject recently. One of the interesting things about the situation is that there is not a shortage of rare earth minerals in the US. Molycorp, the largest US miner of rare-earth materials shut down its mine many years ago becuase of the low prices fetched by these materials. They are now in the process of restarting that mine. The only wrinkle is that they plan to process the materials in China. This makes them subject to export controls by the Chinese. Why are they doing this. Their problem in the US is the regulatory environment in the US for getting a processing plant set up. A solution that does not involve the WTO would be to ensure that the processing can be done in the US.
On the other hand, China's attitude toward other countries mirrors Japan's. The Japanese always imposed unique requirements on products that had the effect of increasing costs and keeping imports out. There are lots of ways to restrict trade. If China wants to be in the WTO system then they need to abide by the rules. Frankly, the countries that do are better off.
While siding with china might seem a good option, it is clear that the European Union and US have the larger market share. Also Europe and US are better prepared technologically. It's not just current technology that these two communities have (which china is slowly and effectively stealing). It's also their ability to time and again create and advance new breakthroughs independently or jointly. If china chooses to butt heads with the US and Europe they will do better in the short term, however as the stable well planned US/Euro machine starts rolling then nothing will be there to stop it.
The game of chess is bilateral. China agreed to enter the WTO to get access to our markets. Their membership is voluntary. Now that they have destroyed much of the economies they trade with (they have a monopoly because they undercut the prices of everyone else), let them leave. World wide depression ensues and all of the debt that they owe goes poof! Our economies can recover w/o China, but China's cannot without ours!
China is still a petty dictatorship run by an elite class. Much like the US, their government and elite are NOT the source of their strength, their people are. But their govenment (like ours) can and often does things against the best interests of their people. Hopefully China's penchant for brinkmanship doesn't lead to a trade war (what the WTO was designed to prevent).
Quite frankly China never should have been allowed into the WTO until it clearly demonstrated it's willinglness to obey human rights. Instead a few greedy industrialists convinced the government of the time to let them. Then the massive imbalance began. Now they own so much of America's debt that they are in a position to force the Americans to convince their allies to let China do what it want's. Yes it's a game of chess, and the world is damned close to checkmate
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