Three of the world’s biggest economies, the U.S., Europe, and Japan, have filed action with the World Trade Organization (WTO) against China on grounds of violating a WTO regulation that states if a member-state imposes an export restriction, it must also limit its domestic supply – in this case, China’s export quota and domestic supply of rare earths.
China is being accused of trying to keep prices of rare earth elements (REEs) low for its domestic manufacturers and its supply levels high, while pressuring international firms to move operations to China by continuing to tighten export restrictions.
According to the U.S. Geological Survey (USGS), China has essentially monopolized the market by controlling over 90 percent of global production of rare earth metals, while accounting for roughly 55 megatons (Mt) of rare-earth reserves – exactly half of the world’s reserves.
The world’s fastest-growing major economy has been dominating the industry since the 1990s by increasing production and driving down prices so low that Western countries’ mines were driven out of business.
China continues to make its export restraints more restrictive, resulting in massive distortions and harmful disruptions in supply chains for these materials throughout the global marketplace – US Trade Representative, Ron Kirk
So what are these so-called “rare-earths” and why are they becoming increasingly important?
“Rare earths” are neither rare, nor earth; the name dates back to the 18th and 19th centuries when the elements were first isolated out of rare minerals – the name stuck but the group of 17 metals known as “rare earths” are actually quite common. However, while these elements aren’t difficult to find, discovering substantial, profitable amounts in a single area proves challenging.
REEs such as lanthanum, europium, erbium, and neodymium are crucial in the development of defense technology – such as lasers, radars and electromagnetic weaponry – as well as electronics and green technology, responsible for powering hybrid vehicle battery packs.
In light of REEs’ monumental impact on high-tech defense weaponry, green technology, and the electronics industry, it’s no mystery why the monopolization of such vital commodities by a single nation ignites concern across the globe. Similar to how oil is used as a coercive tactic in foreign affairs by the Middle East, China’s REEs monopoly is essentially a political weapon.
The WTO lawsuit against China’s export restrictions and internal pricing and supply could take up to two years, if not more, to be settled; with the stakes and the value of REEs high, don’t expect China to succumb to demands quickly nor quietly.
Until next time,
Stephanie
