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US Faces Off With China Over Rare Earths
3/28/2012

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)
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)

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Beth Stackpole
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Walking down a slippery slope
Beth Stackpole   3/28/2012 6:32:54 AM
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I think this whole rare earth issue goes down a slippery slope. While I applaud any efforts to invigorate American manufacturing, whether it's to provide an advantage or to simply level the playing field, there is definitely a case to be made that the United States has no business litigating any country into making decisions about what or what not to mine. That said, China does have a history of manipulating and restricting trade to its competitive advantage. The bottom line is these materials are critical to the future of American manufacturing and innovation--and most importantly, jobs--therefore we have to take some kind of aggressive stand to ensure access. Hopefully, as Ann says, this will happen without ligitation intervention from the WTO.

Ann R. Thryft
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Re: Walking down a slippery slope
Ann R. Thryft   3/28/2012 12:16:23 PM
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"Slippery slope" is a great phrase to describe this issue. Thanks, Beth. "What a mess" is the one that first occurred to me when I read about this action. Not faulting the US, Japan and Europe, but because they basically have been forced--in the poker game of international relations--into dealing this last hand by China. This is not a situation of the US litigating another country into mining. This is a case of one trading partner, China, reneging on its agreements with several other trading partners, refusing to change its behavior after multiple requests and negotiation, and leaving those other partners with only two possibilities: put tail between legs and leave the card game, with some pretty severe consequences, or up the ante.


Beth Stackpole
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Re: Walking down a slippery slope
Beth Stackpole   3/29/2012 6:45:44 AM
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I like your analysis of the situation, Ann--not that I like the outcome. I don't know which is worse for the U.S., leaving the card game with its tail between its legs and being perceived as doing nothing or being aggressive and taking all the flax for trying to litigate a country into something it technically should have no real say in. Sort of a lose-lose situation, in my book.

naperlou
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Re: Walking down a slippery slope
naperlou   3/29/2012 10:01:35 AM
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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.

jmiller
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Re: Walking down a slippery slope
jmiller   3/31/2012 5:01:40 PM
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I am with you.  I hate to see government regulation in any form.  Much less trying to regulate a foreign company.  However, I do also agree in some cases an individual or country may not necessarily do what is best for the entire population but focus on what is best for themselves.

Greg M. Jung
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Uneven Distribution of Natural Resources
Greg M. Jung   3/28/2012 8:57:48 AM
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Great article which also reminds us that each country does not have the same natural resources as its competitors.  As other larger countries (such as China and India) become more and more industrialized and modernized, they will also compete for the same valuable, finite and rare resources on planet earth, which can cause these types of disputes to become more frequent (and more intense).

Hopefully, we can continue to work these issues out peacefully through third party organizations.

Ann R. Thryft
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Re: Uneven Distribution of Natural Resources
Ann R. Thryft   3/28/2012 12:17:22 PM
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Greg, that's a good point about each country having a different mix of natural resources. Which is one of the major reasons the WTO exists. As Obama said, China agreed to follow certain rules of engagement under the WTO, and then chose not to by formulating these policies governing rare earth mining.


Rob Spiegel
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Re: Uneven Distribution of Natural Resources
Rob Spiegel   3/28/2012 1:03:34 PM
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Good article, Ann. China started its rationing of Rare Earth minerals on a rational basis. The government wanted to retain as certain portion of Rare Earh output to make sure its own manufacturers had an adequate supply. That seemed fair. But then they withheld shipments to Japan after a fishing dispute. So the rules morphed. Apparently now the rules are quite unclear.

Ann R. Thryft
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Re: Uneven Distribution of Natural Resources
Ann R. Thryft   3/30/2012 12:44:13 PM
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Withholding shipments after a fishing dispute is a good example of the have my cake and eat it too attitude China has shown in several international situations. This is not a cooperative spirit, or the attitude of an adult negotiating with other adults. The WTO rules and conventions China had agreed to did not change--China's decision to comply with them changed. Yet they want to be taken seriously and treated with respect in the international arena.


Rob Spiegel
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Re: Uneven Distribution of Natural Resources
Rob Spiegel   3/30/2012 2:12:37 PM
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You correct about that, Ann. I think China spends too much time hiding behind the "We're just a developing country" point of view. The POV comes with a whole host of excuses for non-adult behavior. 

jmiller
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Re: Uneven Distribution of Natural Resources
jmiller   3/31/2012 5:04:08 PM
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I think one of the issues here is the fact that cultures do tend to look at contracts or agreements differently.  Through different moral glasses.  And therefore if we are not aware of how they may look at contracts and or agreements and such we may not be talking the same language.

Greg M. Jung
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Re: Uneven Distribution of Natural Resources
Greg M. Jung   3/28/2012 4:47:53 PM
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Will the WTO penalties and sanctions be strong enough to change China's policy should they continue to restrict trade of rare earth minerals?  We already see how China handles IP and patent infringements and does not fully address this issue.  Would the WTO have enough leverage in this case? 

Ann R. Thryft
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Re: Uneven Distribution of Natural Resources
Ann R. Thryft   3/29/2012 12:38:26 PM
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Whether WTO penalties or sanctions will be strong enough to force China to behave is clearly up to China as much as it is to the US, the EU, Japan, or the WTO. This is not grade school where they can be sent to detention: this is the international arena where nations are expected to behave like adults, including honoring your agreements and keeping your promises, and to do so voluntarily. When they don't, things get sticky. In this case, that may mean litigation. That's better than in the past, when it often meant war.


Charles Murray
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Re: Uneven Distribution of Natural Resources
Charles Murray   3/28/2012 7:38:17 PM
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Greg's point is right on the mark: This does remind us that every nation doesn't have the same set of natural resources. It also reminds us how precarious the situation can be one when country, such as China, digs in its heels and tries to be difficult. Many batteries and motors need rare earth metals. Lithium (which is not a rare earth metal) could pose a similar problem one day, since a large portion of it comes from Chile and China (U.S. has virtually zero reserves of lithium). If you took away the rare earths and lithium, electric cars would really have a problem.

cvandewater
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Re: Uneven Distribution of Natural Resources
cvandewater   3/29/2012 10:26:32 AM
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Chuck,

The USA *has* large reserves of Lithium.

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.

http://lithiumabundance.blogspot.in/

So, apparently the situation is not different than with the "rare" earths.

Charles Murray
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Re: Uneven Distribution of Natural Resources
Charles Murray   3/29/2012 9:38:09 PM
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Thanks, cvandwater. I wasn't aware that the U.S. had such lithium reserves.

TOP
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Re: Uneven Distribution of Natural Resources
TOP   3/29/2012 11:26:19 PM
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The abundance of REO in the US is well documented.

LINK

Instead of going to court, dig baby dig.

Nancy Golden
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World Politics Over Natural Resources
Nancy Golden   3/28/2012 10:14:22 AM
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Sounds very similar to the ongoing politics about oil and the Middle East. No easy answers here...to what degree are countries obligated to participate in the world market regarding their own natural resources? What drives those decisions and what rights do other countries have as citizens of the world? The people holding the natural resources have a much different perspective from those who desire them...and at a price that is reasonable...who defines that? Very interesting article and it will be interesting to see how this moves forward.

Dave Palmer
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Re: World Politics Over Natural Resources
Dave Palmer   3/28/2012 12:03:29 PM
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I learned in another Design News article that the increase in rare earth prices was caused by speculation and hoarding, not by Chinese export limits.  The accompanying table was pretty persuasive; it showed that the restrictions have never actually come into play, since even the new, lower limits still exceed the total demand.

I also strongly oppose any effort to use "free trade" agreements to keep countries from deciding what to do with their own natural resources.

In my wife's town in El Salvador, a U.S. company operated a gold mine from 1968 until about 1999.  The cyanide process which they used severly contaminated the river; it is now devoid of fish, contains ten times the level of cyanide permitted by the World Health Organization, and is about as acidic as Coca Cola.  Many people in the area are suffering from kidney failure.

Owned by a wealthy Milwaukee family, the company's fortunes seem to have taken a turn for the worse when its founder died.  His son seems not to have inherited his business acumen; the company's gold mining operations ended in 1999, and according to SEC filings, the company has had no earnings since 2002.  In 2006, the company's mining permit was revoked as a result of its history of environmental problems.

In 2010, the company decided to sue the government of El Salvador for $100 million in "lost profits" under the U.S.-Central America Free Trade Agreement.  You read that right; the company which was responsible for destroying the river decided to sue the country whose river they had destroyed.  Never mind the fact that the company hadn't had any earnings for four years before their permit was revoked.

Fortunately, this "get rich quick" lawsuit was ultimately thrown out on a technicality.  But the mess the company left is still there.  And the idea that companies can challenge a nation's right to protect its own people and environment, and to decide how its own natural resources will be used, is still the law. 

Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   3/28/2012 1:10:19 PM
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Dave, I read the same DN article--about prices. This action is not about prices of rare earths, but about restraint of trade between trading partners, and also about unfair practices while administering the restriction of those substances, such as unnecessarily complex and Byzantine regulations administered by a bewildering array of governmental entities,  as well as sometimes secret, unpublished rules. I read all three, nearly identical requests for consultation. They were quite enlightening and, of course, much too long to quote from in this post.

 

It's also more generally about reneging on the rules of engagement you previously agreed to, without formally requesting to either bow out of, or change, the rules. This breach of good faith and more, of a specific agreement you entered into, does not work on the international stage--or anywhere else.


Beth Stackpole
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Re: World Politics Over Natural Resources
Beth Stackpole   3/28/2012 3:02:48 PM
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Changing the rules of engagement is definitely a problem and it forces the US and others to take action that clouds the real issue, I suppose. What is the expectation of what will come from the WTO action?

Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   3/29/2012 12:34:25 PM
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Beth, while it's not possible to second-guess what the US government, EU and Japan expect specifically, the fact that all three of them have filed nearly identical actions indicates that they at least hope to bring the matter to a head with China. And it's not just the US facing off with them. The EU has already tangoed with China on this subject for a different set of raw materials without much result: the WTO ruled in the EU's favor and against China's export restraints on those materials in January this year:

http://trade.ec.europa.eu/doclib/press/index.cfm?id=774


Paumanok Publications, Inc.
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Re: World Politics Over Natural Resources
Paumanok Publications, Inc.   3/29/2012 10:06:09 AM
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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. 

Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   3/30/2012 12:52:06 PM
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Paumanok Publications, I agree that we should also be looking to find another source of supply rather than let our electronics industry be held hostage. But meanwhile, I think we should also be using the process that's been set up to deal with such disputes such as this one. What's the point  of entering into a trading agreement if you don't plan to keep to the terms of the contract?


Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   3/28/2012 12:18:14 PM
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Nancy, the oil/Middle East analogy is a good one in many ways, although much of that problem to begin with stems from historical mucking up by the British and the French at the close of WWI, by way of the Sykes-Picot agreement. Again, in this case China chose to participate in trade with these other countries under the WTO rules of engagement: and then decided not to on this particular item, but still wants to participate in the trade it wants to participate in. In other words, China wants to determine and change the rules of engagement to suit itself. That's not considered OK in the arena of international relations, and definitely not under the rules of engagement it agreed to with its membership in the WTO.


etmax
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Re: World Politics Over Natural Resources
etmax   3/29/2012 8:38:44 AM
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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

3drob
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Re: World Politics Over Natural Resources
3drob   3/29/2012 9:26:37 AM
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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).

ervin0072002
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Re: World Politics Over Natural Resources
ervin0072002   3/29/2012 9:57:17 AM
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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.

Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   3/30/2012 12:49:47 PM
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ervin0072002, I'm not sure what you mean by an EU/US "larger market share." Of what? Whatever it is, it probably won't be larger for long. China either has or is acquiring/growing the largest markets in many areas: automobiles, oil, you name it. In fact, PetroChina just announced that it's become the world's biggest publicly traded oil producer, ahead of Exxon:

http://www.bbc.co.uk/news/business-17556938. The population statistics driving China's growth and appetite for materials and control of resources show that China's middle class is growing rapidly and the US's is declining rapidly, since class is determined by jobs, and we've shipped those jobs over there. Estimates vary, but one says that by 2030 China's middle class will be 4x that of the US and nearly 4x of Europe's. That's only 18 years away. Meanwhile the US and Europe have aging populations overall, not just considering the size and characteristics of their middle classes.


ervin0072002
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Re: World Politics Over Natural Resources
ervin0072002   3/30/2012 1:24:39 PM
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The reason China is doing so well against the rest of the world is due to their middle class being much lower than the rest of the world. As they catch up Competition will depend on inventiveness. By that point they cannot pass the USA without carrying us along their own level otherwise Jobs will start moving to the US. Also Many say that china's growing economy is bad news for the world when in reality It's just good news for the whole world. Now another billion members of earth are capable of demanding more material goods from the world economy. I can only see this helping the world economy. The problem is not their middle class getting better. The issue is the way china disregards international agreements to benefit its own people. If china maintains a free market, and they protect IP then this recession will be short lived. Yes when a large nation like china enters the free market this is expected to happen. I wish this was controlled to a degree, but in the long run every one will benefit.

 

Conclusion is that their middleclass cannot surpass the middle class of US or Europe. Regardless of how much they try. The only way they can do this is through war. The free market dictates this.

 

Rob Spiegel
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Re: World Politics Over Natural Resources
Rob Spiegel   3/30/2012 4:22:14 PM
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That's good thinking, Ervin. It may take a few decades to play out, but your conclusion is quite sound. We really have nothing to fear over a growing Chinese middle class. I still remember the unfounded fear over the rising economy of Japan in the 1980s. That was needless fear.

Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   4/3/2012 8:34:38 AM
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There's a difference between US concerns about Japan and China. The US feared Japan because we suddenly had a (somehow unforeseen) competitor in electronics, and a very good one. The facts are that US "manufacturers" have not only offshored jobs to Asia but for well over a decade have also been courting China in hopes of selling their products and/or materials/components there because its middle class is getting bigger and about to get huge, way way bigger than Japan's, and because its appetite for everything is expanding.


Rob Spiegel
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Re: World Politics Over Natural Resources
Rob Spiegel   4/3/2012 3:29:49 PM
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Good point, Ann. I've been hearing U.S. brand owners talking about the "sleeping giant" for 30 years. The idea is that China's huge population at some point will become a gigantic consumer market has been watched for many years. China's consumers do indeed like U.S. products. Yet so far, much of that appitite is being filled by counterfeit products. So China's desire for U.S. products has so far been somewhat of a disappointment.

Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   4/4/2012 9:49:36 AM
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Rob, thanks, I'd forgotten that term "sleeping giant" but I remember hearing it too for about that long. And that's a good point, that the middle class consumer appetite is being filled apparently by products from either China itself or other countries.

Rob Spiegel
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Re: World Politics Over Natural Resources
Rob Spiegel   4/4/2012 10:14:59 AM
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China had been pretty determined to fulfill as many of its product needs as possible from within its own companies. U.S. companies have been teaming up with Chinese companies to get some of the action. So rather than sending finished goods to China, U.S. companies are manufacturing goods inside China for sale to the domestic market. GM is a good example. They are the leading automaker in China for seven years running. I'm not sure how it works, but I would guess they have a Chinese parter for the manufacturing.

I understand a Chevy in China goes for about $2,000.

Here's more:

http://abcnews.go.com/blogs/business/2012/01/general-motors-sells-record-2-5m-vehicles-in-china/

Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   4/4/2012 5:04:22 PM
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Rob, thanks for that info on who's manufacturing what where. The manufacturing relationships are certainly complex. Meanwhile, while some commenters have described our overall relationship with China as a chess game--long, drawn-out, complex and slow--this trade restriction section of it looks more like poker to me, as do all of the separate, individual disputes we've had with them. Poker is slower than a lot of other card games, but faster than chess: both depend on strategy and bluff, to somewhat different degrees.


Rob Spiegel
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Re: World Politics Over Natural Resources
Rob Spiegel   4/5/2012 11:14:37 AM
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That's an interesting differentiation, Ann, chess versus poker. I don't really know enough about the inner workings to know if it's chess of poker. But I would guess it's poker simply because poker does move faster and it is less complex. It could be that industry entities are playing poker while the governments are playing chess.

Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   4/5/2012 4:15:32 PM
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Rob, now I'm thinking that the relationships, which are complex, resemble chess sometimes and poker at others, and in both cases, military strategies or tactics. Over the long haul I suspect it's more like chess: you can see your opponent's "hand" (pieces on the board) and guess at their strategy while formulating your own (like war). At the tactical level, I think it's more like poker: you don't know what resources your opponent has for this next confrontation (battle) or what tactics they will use, so you rely more on bluff.

I think your observation is very interesting about government and industry re who's playing which game.


Rob Spiegel
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Re: World Politics Over Natural Resources
Rob Spiegel   4/5/2012 5:14:30 PM
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That's pretty good, Ann. I like your differentiation. To further complicate the world of rare earth minerals, a huge supply has been discovered in southern Afghanistan. Geologists estimate Afghanistan has enough rare earths to supply the world's need for 10 years:

http://www.livescience.com/16315-rare-earth-elements-afghanistan.html

Dave Palmer
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Re: World Politics Over Natural Resources
Dave Palmer   4/5/2012 6:32:53 PM
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@Rob: I'm sure that the people of Afghanistan will be the ones to benefit from their country's mineral resources, just like the people of the Congo have, right?

Maybe this is a game for companies and for governments -- but whether it's chess or poker, it seems that the populations of natural resource-rich countries are almost always the losers.

Rob Spiegel
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Re: World Politics Over Natural Resources
Rob Spiegel   4/6/2012 11:03:19 AM
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I understand your point, Dave. In some of these under developed countries, it is a small number who actually benefit. With the Congo, there is at least a movement among developed countries to avoid the use of "conflict materials." Though I have to say, I'm not sure how well the effort is succeeding.

Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   4/9/2012 12:26:44 PM
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Dave, I agree with you about the unlikelihood that Afghanistani residents will benefit from this discovery. My references to chess and and poker concerned relations between the governments of the US and China, which are actual nations with a sense of statehood and longstanding central governments, regardless of what we may think of them. That description does not fit Afghanistan in the least: politically and sociologically it is much more like many sub-Saharan African "nations."


Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   4/9/2012 12:25:56 PM
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Rob, thanks for that info about the discovery of rare earth minerals in Afghanistan. Given the long history of outside intervention in that country, I find it difficult to believe that the people who live there will benefit from this discovery.


Rob Spiegel
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Re: World Politics Over Natural Resources
Rob Spiegel   4/9/2012 1:27:51 PM
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Some American officials have estimated the Afghan rare earth deposits are worth up to one trillion dollars. So it is significant. That should have some impact on the country's economy even  it it goes to just a few.

http://www.laprogressive.com/afghan-mineral-wealth-highway/

Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   4/10/2012 12:53:18 PM
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Rob, thanks for the info. You're right, that looks promising. However, it's not going to do the country much good overall because Afghanistan isn't really a country, in the sense of a state. It's a collection of people with different ethnic and linguistic origins living mostly in nomadic tribes at conflict with each other, and without any overall unifying sense of statehood. If the main European invasion of North America had been by Vikings or Celts in the years 500-1000 AD, we might have had a sociologically and technologically similar situation here, among native and European-born tribes in conflict with each other.


Rob Spiegel
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Re: World Politics Over Natural Resources
Rob Spiegel   4/10/2012 1:39:02 PM
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Yes, you're right about Afghanistan, Ann, which is probably part of the reason the Soviets and the U.S. have had so much trouble occupying the country. I would think that the dollars would still go into the economy in one way or another, but maybe not.

Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   4/11/2012 12:49:05 PM
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Rob, you're sure right about difficulty in occupying the country by US and Soviet forces. But the problem is, there's no overall economy for the dollars to go into: there are tribes and powerful individuals/families within those tribes. Some of them, most likely those already in power, very likely the ones we don't like, will manage to get the dollars, assuming there are any left after all the mercenaries and whatnot forces we send over there have taken their pickings first. There's no particular reason to think that similar sociopolitical-economic structures (to sub-Saharan Africa or portions of the Middle East like Iraq and our involvement with them) will produce different results.


Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   4/4/2012 4:54:38 PM
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I think the economic and sociological trends don't support the assumption that countries like Europe and the US with aging populations will somehow retain economic or cultural dominance because of "inventiveness," and I can't see how the rising Chinese tide will also float our boats because the so-called "free market" somehow dictates this. Historically speaking, these assumptions have been shown to be incorrect. The free market does not exist in the abstract; it's made up of individuals and cultures. Resources are limited, especially with the current global population burden: if one group takes them they are not available to another group.


Ann R. Thryft
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Re: World Politics Over Natural Resources
Ann R. Thryft   3/29/2012 1:00:59 PM
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etmax and 3drob, I agree with you, not just about China's membership in the WTO, but about the fact that we've sent most of our manufacturing there, as well as our debt. I have great respect for the country and its people, culture and history, but I don't think much of the management and its dismal history in human rights, political suppression, and environmental devastation.

Like TJ, I would prefer to vote with my/our wallet. But strategies we can pursue as individuals in a free market society don't translate well to international politics and the world stage: the scale and the rules are different.


bob from maine
User Rank
Platinum
Re: World Politics Over Natural Resources
bob from maine   3/29/2012 3:18:02 PM
NO RATINGS
The essence of the issue recognizes how China created a surplus of rare-earths by essentially dumping, thus diminishing world-wide price; then after their competition folded due to inability to make a profit, China created a world-wide shortage. We recognize the need for rare-earths and acknowledge China's position of strength and again, find ourselves powerless to take the steps necessary to effect change. We will never withhold Rice, Corn, Wheat, Student Visa's, trade opportunities, whatever, in retaliation for China's violation of their agreement to the WTO charter. We find it is environmentally undesirable to (fill in the blank), thus look to other countries to provide this resource. We then become resentful when those other countries balk at complying with our definition of "fair".

Rob Spiegel
User Rank
Blogger
Re: World Politics Over Natural Resources
Rob Spiegel   3/29/2012 3:40:08 PM
NO RATINGS
I would guess that when it comes to Rear Earths (which are not rare), it's a tad more simple. The first part of your comment is right. They produced a surplus that made it economically undesirable for other countries to mine Rare Earths. Then they cut back to protect their own industries (they admitted that). Now the prices are high enough for non-China mines to start digging. All that makes sense. The catch is that it will take two or three years for all of the many Rare Earth minerals from U.S. and Australian mines to flow out to the market.

rcwithlime
User Rank
Silver
Lithium is not the only rare earth mineral,
rcwithlime   3/29/2012 3:51:31 PM
NO RATINGS

Lithium is not the only rare earth mineral involved in the restriction of supply.

 

Primary to flat panel TV's, which, as we all know, are the primary current design. There is Neodymium to make the stronger magnets. This is the 2nd challenge to China's restrictions on exports and covered in this case are tungsten and molybdenum, but there is at least 17 minerals of concern.

 

I do agree that China sees an opportunity and is using that to its advantage. I believe we can all understand that. The issue is the playing field rules. As stated, we all live in a "Global economy", and trade regulations are, in part, there to provide products from one country with available exports to others without. Object is to open worldwide markets and stabilize world economies. It is not there to provide open markets and trade benefits for just one country.

 

China has found a way to get around the tariff rule of subsidized manufacturing. Just increase the cost of other countries products. They will find out that other countries will not stand for this, and tariffs will increase and imports will decrease accordingly, out of self preservation.

 

Personally, I would like to see the majority of clothing, steel, and similar mfg. imports dramatically reduced to allow the U.S. mfg. to re-ignite. (I am not sure that I would want auto mfg to go this route, as forign imports is what has helped push the Big Three to increase reliability and durability of their products.) Sure, this would raise prices quite a bit initially, but as our economy starts to boom, prices would stabilize. As the free market system of supply and demand reacted, competition would increase, decreasing costs and further increasing employment and therefore the overall economy. Only issue then would be to not repeat the past by having excessive wages, benefits, and pensions outstrip the overall standard of living (Which was one of the driving forces behind outsourcing to other countries.) There can be a happy medium.  Once again we would see the 'Archie Bunker" era where one spouse is all that is required to support a family and pay the mortgage.

 

But I digress....

 

Either way, if any country is to take advantage of the benefits of the WTO and global economy, they need to abide by the majority rules, or leave and be on their own.

 

Just my opinion....

 

rcwithlime
User Rank
Silver
Lithium is not the only rare earth mineral,
rcwithlime   3/29/2012 3:51:33 PM
NO RATINGS

Lithium is not the only rare earth mineral involved in the restriction of supply.

 

Primary to flat panel TV's, which, as we all know, are the primary current design. There is Neodymium to make the stronger magnets. This is the 2nd challenge to China's restrictions on exports and covered in this case are tungsten and molybdenum, but there is at least 17 minerals of concern.

 

I do agree that China sees an opportunity and is using that to its advantage. I believe we can all understand that. The issue is the playing field rules. As stated, we all live in a "Global economy", and trade regulations are, in part, there to provide products from one country with available exports to others without. Object is to open worldwide markets and stabilize world economies. It is not there to provide open markets and trade benefits for just one country.

 

China has found a way to get around the tariff rule of subsidized manufacturing. Just increase the cost of other countries products. They will find out that other countries will not stand for this, and tariffs will increase and imports will decrease accordingly, out of self preservation.

 

Personally, I would like to see the majority of clothing, steel, and similar mfg. imports dramatically reduced to allow the U.S. mfg. to re-ignite. (I am not sure that I would want auto mfg to go this route, as forign imports is what has helped push the Big Three to increase reliability and durability of their products.) Sure, this would raise prices quite a bit initially, but as our economy starts to boom, prices would stabilize. As the free market system of supply and demand reacted, competition would increase, decreasing costs and further increasing employment and therefore the overall economy. Only issue then would be to not repeat the past by having excessive wages, benefits, and pensions outstrip the overall standard of living (Which was one of the driving forces behind outsourcing to other countries.) There can be a happy medium.  Once again we would see the 'Archie Bunker" era where one spouse is all that is required to support a family and pay the mortgage.

 

But I digress....

 

Either way, if any country is to take advantage of the benefits of the WTO and global economy, they need to abide by the majority rules, or leave and be on their own.

 

Just my opinion....

 

TJ McDermott
User Rank
Blogger
It's called TRADE for a reason
TJ McDermott   3/28/2012 3:09:58 PM
NO RATINGS
China wants to play games with exports of its natural resources?  Let them.  It's their choice.  Consumers are under no obligation to do business with a seller that has unsavory practices.  China has the lion's share of this particular commodity, but it does not have a complete monopoly.

The "shortage" is short term if other producers restart their mines.

We do not HAVE to do business with them.

williamlweaver
User Rank
Platinum
Re: It's called TRADE for a reason
williamlweaver   3/28/2012 9:25:44 PM
NO RATINGS
The CBO projects an additional increase of $6 Trillion in the US Debt over the next 10 years. Forced Raw Materials from China or $6 Trillion in Loans from China. We can only pick one. The game is called Chess and the current administration does not play it well.

Ann R. Thryft
User Rank
Blogger
Re: It's called TRADE for a reason
Ann R. Thryft   3/29/2012 12:40:42 PM
NO RATINGS

Uneven distribution of resources is why individuals and nations trade in the first place. TJ, I would agree with you if China had not joined the WTO, agreed to abide by its rules, and then broken those rules. China seems to want to have its cake and eat it too, in this case and in many others. And yes, we DO have to do business with them, at least in the short term: as Rob has pointed out, restarting those mines will take at least a couple of years to make a difference in supply. Right now, they basically do have a monopoly. Plus, we are now formal trading partners with them, as members in the WTO, which comes with a set of duties and responsibilities, as well as rights. And like it or not, we are all now living in a global economy.


TJ McDermott
User Rank
Blogger
Re: It's called TRADE for a reason
TJ McDermott   3/29/2012 12:46:43 PM
NO RATINGS
Ultimately, it's China's dirt, and China can do with it as it sees fit.  I would not do business with an unethical supplier; I vote with my wallet.

 

Mydesign
User Rank
Platinum
Chinese deals
Mydesign   3/29/2012 2:08:58 AM
Ann, china is controlling about 90% of the rare earth minerals and hence they always have a monopolistic nature. What I feel that rare earth minerals are like natural resources, where it has to be share among other countries for human-technological benefits. So I strongly believes that there should be some fair dealings from Chinese government, otherwise it may lead to monopolistic way of business and ends up in an unbalanced way.

ChasChas
User Rank
Platinum
Education/technology is our lever
ChasChas   3/29/2012 10:04:47 AM
 

Chinese students are coming here in record numbers to take our technology.    Send all  the Chinese students home until China plays fair.

http://www.csmonitor.com/USA/Education/2010/1115/Record-number-of-Chinese-students-flock-to-US-colleges

Ozark Sage
User Rank
Silver
Re: Education/technology is our lever
Ozark Sage   3/29/2012 1:07:51 PM
ChasChas This will work and IF it is done you'll be able to understand the profs again!

rcwithlime
User Rank
Silver
Just the newest in trade issues with China
rcwithlime   3/29/2012 10:25:38 AM
NO RATINGS
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.

 

Absalom
User Rank
Gold
Mining, logging, manufacturing
Absalom   3/29/2012 10:26:28 AM
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.

sensor pro
User Rank
Gold
Re: Mining, logging, manufacturing
sensor pro   3/29/2012 10:46:58 AM
NO RATINGS
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.

Absalom
User Rank
Gold
Re: Mining, logging, manufacturing
Absalom   3/29/2012 6:34:27 PM
NO RATINGS
China has been waging a trade war against us for decades and we have been to timid and/or stupid to do anything about it. Running to the WTO begging for help is for babies. Real sovereign nations don't ask anyone's permission to defend themselves.

William K.
User Rank
Platinum
Rare earth shortages
William K.   3/29/2012 4:43:48 PM
The very best choice would be to come up with an alternative to the rare earth elments so that we did not need them. I realize that would be a challenge but it would also probably lead to cost reductions, and a way to be less dependant on those countries that choose to take advantage of us. Then they can eat their precious metals and other rare earths. That would be the very best solution.

Tim
User Rank
Platinum
Re: Rare earth shortages
Tim   3/29/2012 9:13:21 PM
NO RATINGS
It would be great to come up with an alternative.  Right now though, it looks like China has found something that allows them some leverage over other industrial nations. 

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