The rare earth industry is among some of the most critical industries of the technological age. Rare earth minerals are specifically used in the creation of smartphones and military weapons such as missiles. Following actions by the Chinese governments to cap rare-earth exports, prices in rare-earth minerals sharply rose to the dismay of China’s trading partners (Feenstra & Taylor, 2017). Nevertheless, the Chinese, as a member of the World Trade Organization, were forced to dismantle the export cap policy as it became more redundant. This paper discusses the Chinese and their activities in the rare earth minerals industry and proposes better ways to protect the industry against adverse actions where the chief producer shifts ground.
China is currently the largest producer of rare-earth minerals in the world. Before the export caps for these minerals came into place in 2006, the Chinese enjoyed market share control, catering for 93% of total exports in rare-earth minerals in the globe (Wübbeke, 2013). At this time, rare-earth minerals were exported in large quantities. However, the Chinese government introduced a quote system in 2006 which would limit the amount of rare earth minerals being exported in the country in a bid to ‘reduce pollution caused by rare-earth mineral producers’. This led to the sharp rise of prices for rare-earth minerals, to the dismay of China’s trading partners, including the United States, the European Union and other economic blocs. This is because, among other things, this quota system was against the spirit of free trade instituted by the World Trade Organization and impacted trade negatively across the world. Nevertheless, other rare-earth mineral producing countries took opportunity of the quota system in China and amped production of minerals, shifting focus from the Chinese as main producers (Massari & Ruberti, 2013). As of 2015, when the policy was finally being rolled over, the Chinese market-share had shrunk to just 86%, with total exports sharply declining to below quota levels. The policy has thus become redundant.
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Considering the events that occurred in the course of China’s introduction of the quota system, it is important to ensure that such industries are protected against adverse actions by the monopolist producers. In this case, trading blocs could approach the World Trade Organization petitioning the disbandment of such policy, which went against the interests of free trade. This is a mature step to take considering that international relations rely on dispute resolution mechanisms for the effective solution of international trade challenges. The judicial arm of the World Trade Organization would adjudicate such an issue setting the precedent for the deciding of similar future cases. At this stage, the interests of China as a nation would be measured against the interests of the international community in the development of world trade. In such a case, China would be forced to withdraw their capping policies and adopt alternative methods of ensuring environmental preservation in light of processing rare earth metals (Business Wire, 2015).
Moreover, the actions also came with the development of additional trade options which would provide sufficient pressure against China for the withdrawal of the anti-trade policies. This would amount to sufficient pressure from the international community in urging China to drop the policies. This is because where other alternatives exist and provide the international community with sufficient rare-earth minerals supplies, China would not achieve its quota targets, thereby rendering their policies redundant. In such a case, the international community will have succeeded in persuading China, both in a legal and trade perspective, that the application of quota systems for the export of rare-earth minerals would be an ineffective tool to achieve environmental conservation. Furthermore, such a tool would become harmful for trade, resulting in a significant loss of their market-share to other stakeholders.
Referring to other stakeholders, the success of the proposal to seek legal redress hinges on the establishment and growth of the rare-earth minerals industry in other producer countries including the United States. Noting that China produce 93% of the world’s share of rare-earth minerals, it is necessary that another market player is groomed in achieving higher production to counter Chinese actions in placing quotas on exports. In this case, this is the United States. While the country did not produce enough rare-earth minerals to counter the extensive Chinese production, investment in the industry is necessary for its development. Investment in the industry will improve national output of the minerals, providing the United States as an alternative to Chinese rare-earth minerals. Furthermore, establishing favorable trade policies for the export of rare-earth minerals in the country is necessary. This will portray the country as a favorable alternative rare-earth minerals producer, compared with China. Again, foreign direct investment could be made in the case where the country lacks sufficient resources to establish and develop the industry completely, thereby inviting international partners to partner in the growth of the industry.
Conclusively then, the international community will have dealt with the issue at hand – quota systems in China for the export of rare minerals – as well as established sustainable solutions to the shortage of rare-earth minerals in the international market.
References
Business Wire. (2015). China ends rare earths export quotas . Retrieved from The Australian Business Review: http://www.theaustralian.com.au/business/business-spectator/China-ends-rare-earths-export-quotas/news-story/54ddf7796de90412b98434393fba124b
Feenstra, R. C., & Taylor, A. M. (2017). International trade (4th ed.). New York, NY: Worth.
Massari, S., & Ruberti, M. (2013). Rare earth elements as critical raw materials: Focus on international markets and future strategies. Resources Policy, 38(1) , 36-43.
Wübbeke, J. (2013). Rare earth elements in China: Policies and narratives of reinventing an industry. Resources Policy, 38(3) , 384-394.
