Is the U.S. Being Unfair in China Rare Earth Complaint? Debate Rages
March 19, 2012 3:55 PM
comment(s) - last by
Is China playing a clever capitalist or malicious miscreant?
To the victor go the spoils, they say. But the U.S. isn't happy with China's control of over 95 percent of rare earth metal production. It's
lodged a formal complaint
World Trade Organization
, with President Barack Obama accusing the Asian economic giant of playing dirty.
I. Once the U.S. Was a Rare Earth Leader
The earliest mining of rare earth elements came from placer sands in India and Brazil. Then in the 1950s, South Africa took the lead with its rare earth containing monazite deposits. Between the 1960s and 1980s, Mountain Pass mine in California was a leading producer.
Then came the red giant. China, which owns an estimated third of the world's rare earth deposits, pumped up production in Inner Mongolia in the 1990s, putting price pressure on American and other producers. It worked. The Mountain Pass mine was shuttered in 2002, and with it the majority of American rare earth mineral mining.
Slowly China came to dominate rare earth metal production, a realm once dominated by the U.S. (neodymium magnets pictured) [Image Source: Doug Kanter/Bloomberg]
But in their quest for ever more-efficient power electronics, electric vehicle makers, flat-panel television makers, wind turbine makers, and solar panel makers all turned to this category of scarce resources. In short, rare earth minerals suddenly became a prized commodity, just as the U.S. exited the market and China cornered it.
China responded by imposing a
2010 cap on exports
, which continued into 2011. The artificial ceiling limited exports and sent prices soaring,
the electronics, alternative energy, and automotive industries.
That pain finally boiled over in the form of the trade complaint filed by the EU, U.S. and Japan last week.
II. Tough Talk
"We met at least a half a dozen times with the other countries that joined us. And I'm not talking about 'howdy dowdy' kind of meetings. These were three and four day-long sessions of going through legal issues," a U.S. official is
as saying. "Literally thousands of pages of Chinese language documents needed to be found, translated and analyzed."
Fertile sands: a laborer moves earth at a Chinese company's Inner Mongolia rare earth metal mining facility [Image Source: Stringer Shanghai/Reuters]
U.S. Trade Representative
Ron Kirk views this as a case of a fresh player not wanting to play by the rules. He states:
In fact China adds a small fraction of value to such a product - as reflected in the final price - usually at the assembly stage. China's share is well below 10 percent. Our businesses, as a general rule, really do believe, and maybe it's that American spirit, let me go compete in the global market and I'll accept that if (my friend) has got a better idea she wins and sometimes I'll win. But you've got to promise me that the deck's not going to be stacked.
I'm not saying you can't have state-owned enterprises. But how do we determine to give my businesses and competitors the sense that they truly are operating as independent market-driven entities?
Ironically the U.S. effort received a boost from a WTO
to the EU in a complaint about subsidies the U.S. government paid to The Boeing Comp. (
), a Seattle, Wash. based firm and top aircraft contractor. The U.S. has an almost identical counter-complaint about EU subsidies to Airbus, a subsidiary of the European Aeronautic Defence and Space Company N.V. (
In the WTO complaint, judges set in place new guidelines. Under these rules, if a nation refuses to reveal information on subsidies (as the U.S. did with Boeing) it will "draw negative inferences" -- assume the worse. This could be a fatal policy for China who reportedly hasn't published information on
any of its subsidy efforts
in five years.
III. Is the U.S. Being Unfair?
But some say the U.S. and Europe are being unfair to China. While China doesn't necessarily have
the best environmental track record
, expanding rare earth production could damage the Mongolian wilds, as well as put miners' lives at risk. Also, there is some irony that the U.S. and European authorities are irate at China for playing skillful entrepeneur at driving a hard bargain when it comes to rare earth resources.
Jonathan Fenby, head of China research at
, says that China is a convenient whipping boy for American politicians, stating, "I think that in this electoral season (in France and the United States), China-bashing is on the rise. Hence the action. China is an obvious easy candidate and it is interesting that in the U.S. the Republicans, normally free traders, have gone for China."
But he warns that the WTO complaints and tough rhetoric may backfire, commenting, "If China hits back, how important is the Chinese market to Western firms, and what is the impact on foreign companies that rely on China for assembly such as Apple?"
Pushing China too hard could backfire, particularly for U.S. companies like Apple who rely on the nation to produce their products. [Image Source: PocketLint]
China isn't above such petty retaliation. It recently sunk a $12B USD Airbus deal after the EU moved to enforce carbon taxes on it. With the manufacturing futures of virtually every American devicemaker --
, Inc. (
) -- on the line, Mr. Fenby argues that America may have more to lose than the Chinese.
This article is over a month old, voting and posting comments is disabled
3/19/2012 11:36:33 PM
The obvious solution to this is, as soon as China floods the market with cheap rare earths, slap on an indefinite subsidy on the american production of rare earths. Assault largely abated. I doubt it'd take more than ~$5b a year to make all of this mess go away.
3/20/2012 1:32:06 PM
with all the worlds super-economies on board, if it is suspected China will rinse and repeat, I think the pact will simply purchase from the mountain-pass (or other friendly facilities) even if the prices are higher.
China is playing with the big dogs, and like Iran, shouldn't be taken seriously.
"We’re Apple. We don’t wear suits. We don’t even own suits." -- Apple CEO Steve Jobs
Famed Writer/Monologist Caught Lying About Much of Apple China Exposé
March 18, 2012, 3:15 PM
Obama Blasts China in WTO Complaint, China Claims it Can't Stop Hoarding
March 14, 2012, 4:14 AM
Unlike U.S., China's Smaller Electric Vehicle Plan Puts Local Firms First
May 9, 2011, 1:44 PM
China's Stranglehold on Rare Earth Metals Could Choke EV, Hybrids
April 30, 2010, 11:41 AM
Hybrids, EVs More Dangerous to U.S. Security Than Foreign Oil, Says Expert
April 19, 2010, 11:31 AM
Hot Air? President Obama, G7 Pledge to Eliminate Most Fossil Fuel Use by 2100
June 8, 2015, 5:40 PM
Study Predicts Self-Driving Vehicles Could Rake in Billions
March 6, 2015, 8:34 AM
Dual-Motor Tesla Model S P85D's "Insane Mode" Shocks Passengers
January 28, 2015, 11:18 PM
2016 Cadillac CTS-V Packs 640 hp Punch with 200 mph Reach
January 23, 2015, 3:25 PM
BMW Testing Tech to Allow Users to Auto-Park, Summon Cars Via Smartwatch
December 16, 2014, 9:30 AM
Lamborghini Offers Up $6,000 Leather-Bound Android Smartphone
December 12, 2014, 3:12 PM
Most Popular Articles
F-16 Schools Trillion-Dollar F-35 in Mock Combat, Fleeing is Best Option Pilot Admits
July 1, 2015, 5:53 PM
SpaceX Falcon 9's Seventh Supply Mission to ISS Ends w/ Fiery Stage 1 Explosion
June 28, 2015, 1:10 PM
SanDisk's 200GB microSDXC Card Turns Smartphones Into Enviable PMPs
June 26, 2015, 2:02 PM
Windows XP, Vista Users Can Get Free Windows 10 Upgrade Thanks to Loophole
June 23, 2015, 2:23 PM
Apple Music: The Money, The Launch Hiccups, and the Nitty Gritty Details
June 30, 2015, 5:09 PM
Latest Blog Posts
Sceptre Airs 27", 120 Hz. 1080p Monitor/HDTV w/ 5 ms Response Time for $220
Dec 3, 2014, 10:32 PM
Costco Gives Employees Thanksgiving Off; Wal-Mart Leads "Black Thursday" Charge
Oct 29, 2014, 9:57 PM
"Bear Selfies" Fad Could Turn Deadly, Warn Nevada Wildlife Officials
Oct 28, 2014, 12:00 PM
The Surface Mini That Was Never Released Gets "Hands On" Treatment
Sep 26, 2014, 8:22 AM
ISIS Imposes Ban on Teaching Evolution in Iraq
Sep 17, 2014, 5:22 PM
More Blog Posts
Copyright 2015 DailyTech LLC. -
Terms, Conditions & Privacy Information