Potential for trade disputes is increasing over China’s export quotas of rare earth minerals crucial for manufacturing key electronic parts. China said it would reduce export quotas of rare earth minerals by 35 percent for the year 2011. The US said last week that it would file a case at WTO. Electronics manufacturers are heavily dependent on China’s exports of rare earths, as it owns a major part of world’s rare earths reserves. China is estimated to contain almost 90 to 97 percent of world’s reserves of those minerals.
Rare earth minerals are a group of 17 chemically similar elements that include scandium, yttrium, and fifteen lanthanides. Elements such as neodymium, cerium and lanthanum are called lanthanides. These elements collectively occupy a close area in the periodic table. These are used for making many electronic goods such as smart phones, monitors of TVs and PCs, hard discs of laptops, condensers, magnets in batteries of hybrid cars, and headphones of Apple iPods. It is almost impossible to imagine a world without these electronic goods nowadays.
China has been cutting export quotas of rare earths for last few years, which has become a controversial issue in world trade. Previously China said it was cutting down exports to meet domestic demand. China is also claiming that the companies involved in mining and export of rare earths are causing enormous environmental damage. China wants to control excessive mining that became severe especially in Southern China, a spokesperson of the Chinese commerce ministry is quoted as saying by BBC news.
Japan and the US are critical of China’s moves. China reduced 72 percent to 7,976 tons of export quotas in second half of this year. The US said last week that it might lodge a complaint on restraining supplies of rare earth minerals. Japan’s Sony Company said China’s decision was against free trade principles. The latest decision to curtail production and exports in 2011 has potential to augment trade tensions between China and the US. China’s finance ministry revealed some days back that it would increase export taxes from 15 to 25 percent for some of the rare earth minerals.
China allotted 14,446 tons of rare earths for the first half of 2011. It is against 22,282 tons in the first half of 2010 and 7,976 tons in the second half. China produced 97 percent of world’s rare earths supplies last year. The US did not produce any so far, but it is supposed to start producing from next year. Japan has already planned to decrease dependence on China exports. Toyota formed a venture with a Vietnamese state run company that will start exporting rare earth metals to Japan in 2012. Japanese companies experienced a critical situation when China stopped its exports after a dispute over arresting a Chinese trawler near disputed islands in South China Sea. Later, China lifted the ban on exports to Japan but Japan took a lesson from it.
There are domestic companies as well as foreign owned companies in China involved in mining and export of these minerals. China aims to form China Association for Rare Earths to organise above 90 domestic rare earth companies under the government’s oversight. It will be dealt with by the ministries of Industry and Information Technology, the spokesperson for the association said as per Bloomberg news.
China has been cautious of utilising domestic mineral resources. It is preserving its own resources and depending majorly on imports of many minerals. China invested heavily in India and Africa in mining of Iron, Bauxite and several essential ores of metals and subconductor materials. It is acquiring equity shares in overseas companies and granting loans to mining and oil investors. It is obtaining long-term contracts over procurement of oil and minerals from foreign resources.
China may be protecting its reserves for future use, a tactic over which the US is furious for some time. One can observe that China is a self-oriented country and does not share any global responsibilities, if any. China is not seen involving in any global political or economic issues except in the case of its close ally North Korea. It remains to be seen whether such tactics are helpful or detrimental to its interests. However, it is certainly detrimetal to the global supply system of mineral resources.