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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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