In Chapter 10 of your textbook, there is a Headlines segment titled “China Ends Rare-Earth Minerals Export Quotas.”
Please read this article in your textbook, and then do further research on the 17 rare earth minerals that are discussed in the article. Explain what China is doing with the rare earth industry, and come up with a proposal to counter China’s actions. Does the United States have an extensive rare earth industry? If not, what would you do to grow this industry and protect it? How could import quotas increase domestic prices of rare-earth minerals?
Your case study should be at least three pages in length. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations. Cite at least one resource from the CSU Online Library.
HEADLINES
China Ends Rare-Earth Minerals Export Quotas
China has removed ten-year-old export restrictions on strategically significant minerals that provoked a trade war and caused other nations to become less dependent on Chinese imports. The change follows Beijing’s defeat in a 2013 World Trade Organization battle. However, Beijing’s approach also turned out to be of limited help as several nations discovered alternate sources for rare earths, which are widely employed in high-tech fields like smartphones and missile systems. Frank Tang, an analyst at the investment bank North Square Blue Oak, stated that the pressure from the WTO judgment was probably the reason for the move. China claims that as a WTO member, it will be required to follow WTO regulations.
The quota system was formerly a significant concern in world trade. When China cut its export quota for the 17 elements by 40% from the year before, it caused a dramatic rise in rare-earth prices worldwide—in some cases a tenfold increase. According to China, the initiative was made to clean up the country’s severely polluting rare-earth mining sector. The action was referred to by the Obama administration as a “wake-up call.” Following trade concerns, rare earths were added to a long list of products—including solar panels and car parts—that had recently caused tension between China and its trading partners. In 2012, the United States, the European Union, and Japan raised concerns that China was violating WTO regulations by manipulating the quota to drive up rare-earth prices globally.
However, since that time, the world’s reliance on Chinese minerals has decreased. Up until recently, China generated nearly 93% of the rare earths used in the globe. As other producers increased supplies, China’s proportion of the world’s rare-earth production decreased to about 86%. China’s exports increasingly routinely fall short of the quota system’s maximum limits. It loosened quota limitations in 2012. However, government representatives claimed that the quota’s days were numbered when it lost the WTO dispute.
From “China Ends Rare-Earth Minerals Export Quotas,” by Chuin-Wei Yap, Wall Street Journal, January 5, 2015, online edition. Republished with permission of Dow Jones & Company, Inc. Through Copyright Clearance Center, Inc., permission was granted.
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