China’s Rare Earth Element (REE) Export Regulations: Source of Contention for WTO
China’s Rare Earth Element (REE) Export Regulations: Source of Contention for WTO
China is blessed with many resources. Rare earth element is one of them. Rare earth element or REE export regulations in China were found to be in violation of trade rules earlier this year by the World Trade Organization (WTO). WTO indicated that it viewed the export regulations to be an attempt to secure preferential use for domestic companies and foreign investors. China may challenge this ruling in May. However, the REE industry in China has already judged the ruling to be irrelevant. The dispute settlement panel of WTO has declared that China has been found guilty of rule violation. But, China continues to be the largest consumer and producer of REE in the world.
In fact, the scene is such that China has many technical and economic advantages with respect to the REE value chain. This has caused foreign mines to have become more dependent on REE from China. REE prices have fallen considerably from a very high cost in the year 2011. No country can challenge China’s expertise and massive advantage on the REE scene. India and Japan have failed to cooperate for any movement with respect to REE.
The ruling by WTO in March was an outcome of an investigation initiated by them following a case filed by the US with support from the EU and Japan. China’s export quotas aimed to achieve the goals of industrial policy. They did not take environmental damage into account. Beijing had asserted its right to use of export quotas and taxes, It also reiterated its stand that it would choose which companies get to export the product. The western nations and Japan have opposed China’s attempt to use export restrictions to protect domestic industries. What is equally important is that they have also protested against a helping hand to Chinese firms at the cost of their foreign rivals through export restrictions.
For the EU, this ruling has been very important because it has always focused on reviving its manufacturing sector through clean and eco-friendly high tech products and services. Along with this, the EU has used REEs that are dirty-to-mine and have no domestic source. But, the Chinese REE industry is unconcerned with the current riling. This is because this sector has become so focused on its domestic operations that it had not even met the export restriction quotas declared by the Chinese government. When China’s government declared export curbs by 2010, international users responded by stockpiling REE. However, this may have been through the smuggling of imports from China. The global slowdown impacted the REE industry by 2011. High stockpiles by foreign users were the reason that demand for REE from China fell.
The Ministry of Industry and Information Technology in China also took steps to weed out illegal mining. It also worked towards protecting domestic companies in this sector. While the volume of domestic demand for REE in China is strong, the prices are low. But it is not surprising that the REE industry is not impacted because China has intermediate industries which need REE. China also produces close to 85% of the REE in the world. Half the REE resources of the world are in China.
China has the best capabilities when it comes to separating rare earth oxides from concentrates. It can also refine REOs into metal as well as metallic alloy that are required by intermediate industries such as glass. Apart from China, the only other country which has an advantage in this field is Australia. The government owned China Non Ferrous Metal Mining Group placed a bid to acquire Lynas which operates the Mount Weld mine located in Australia. This failed bid was made in 2009.
The India-Japan REE partnership also needs to gather momentum if China’s REE advantage has to be caught up with. While certain nations may resort to filing cases for initiating action, China is likely to remain on the top of the chain when it comes to REE. Apart from its vast natural resources, China also possesses advantages such as a work oriented culture and a passion for excelling.
China is currently battling economic uncertainty but its REE industry remains untouched by the turbulence. As for the wider picture, when it comes to China, the scene is always changing and mostly for the better.
