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US, EU and Japan challenging China’s export restrictions on rare earth elements, tungsten and molybdenum

14 March 2012

The US, the EU and Japan are challenging China’s export restrictions on 17 rare earth elements (REE) as well as tungsten and molybdenum by formally requested dispute settlement consultations with China in the World Trade Organisation (WTO). This follows a successful EU challenge at the WTO on similar restrictions for other raw materials earlier this year.

The export restrictions imposed by China on the rare earths, tungsten and molybdenum are mainly quotas, export duties, minimum export price system, as well as additional requirements and procedures for exporters. Rare earths, molybdenum and tungsten have a wide spectrum of applications—in hi-tech and green businesses, cars and machinery manufacturing, chemicals, steel and non-ferrous metal industries:

  • REE. Rare earth elements include 17 chemical elements in the periodic table, specifically 15 lanthanides (lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium) as well as scandium and yttrium.

    Rare earths feature unique magnetic, heat-resistance and phosphorescence properties. They are used to directly produce highly efficient magnets, metal alloys, phosphors, optical material, battery material, ceramics, special abrasive powders. These materials are key components of many downstream and consumer products such as: wind power turbines; catalyzers (for automotive exhaust treatment and oil cracking); energy-efficient bulbs; motors for electric and hybrid vehicles; flat screens and displays (LED, LCD, plasma); hard drives; car parts; camera lenses; glass applications; industrial batteries; medical equipment; or water treatment—to name just a few.

    While rare earths often constitute a small share of the finished product, they are most of the time non-substitutable (and even if so, with consequences in the form of redesigned and/or more costly final product). Their non-availability can lead to the disruption of whole value chains. China is a monopoly supplier of rare earths with a 97% share of world production.

  • Tungsten and molybdenum. Tungsten is a very hard metal that makes an important contribution, through its use in cemented carbide and high speed steel tools, to the achievement of high productivity levels in industries. It is used in lighting technology, electronics, power engineering, coating and joining technology, the automotive and aerospace industries and medical technology.

    China is the lead producer of molybdenum worldwide and accounts for 36% of the global production.

We want our companies building those [high-tech and clean energy products] right here in America. But to do that, American manufacturers need to have access to rare earth materials—which China supplies. Now, if China would simply let the market work on its own, we’d have no objections. But their policies currently are preventing that from happening. And they go against the very rules that China agreed to follow.

Being able to manufacture advanced batteries and hybrid cars in America is too important for us to stand by and do nothing. We’ve got to take control of our energy future, and we can’t let that energy industry take root in some other country because they were allowed to break the rules. So our administration will bring this case against China today, and we will keep working every single day to give American workers and American businesses a fair shot in the global economy.

—President Obama

A request for consultations is the first step in the WTO dispute settlement process. The US, EU and Japan hope to use the WTO consultation process to arrive at a mutually satisfactory solution with China. If no satisfactory solution is being found, the dispute can be transmitted to a WTO Panel for its ruling.

March 14, 2012 in China, Manufacturing, Market Background, Policy | Permalink | Comments (14) | TrackBack (0)

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World firms, or at least GCC readers, knew this REE problem was coming for years.

Come on.

1. Basic freedom allows all countries to stop/block exports of all products essential to their own development. It is NOT a crime but a simple self protection measure.

2. Many so called free large countries (like USA) effectively and unlawfully block import of many products with extremely high tariffs (300+%) to protect their local industries, lobbies and to win elections. That is (or should be) a criminal act.

3. Canada has often been a victim of 2) above.

1. No. If you sign up to the WTO, then you agree not to do this - so yes, in that sense it is a 'crime' for China to do this.

2. I'm not aware of any countries that don't do this, but yes, this is wrong in the same sense that China is wrong in blocking exports. If you agree not to do these things, DON'T DO THESE THINGS.

3. Zzzzzzzzzzz.


China has a central communist government, when it comes to strategic minerals there IS NO market. We need to understand this about them.

They want it both ways, reap the benefits of trading with others, using their low cost and abundant labor, but keep all the advantages of restrictions whenever they feel like it.

SJC....who doesn't...certainly not USA.

It is funny how intolerant we become when China is moving on the world market place using all the same methods we used for so many decades. In other words, we strongly believe that China should do what we preach but not what we do or have been doing.

Didn't we used cheap (slave and semi-slave) labor for centuries and are we not still using very cheap south of the border labor by the million today?

It is funny how tolerant some become of China when China uses the same methods they condemned the great Satan for using.

In other words, they strongly believe that China should be allowed to anything we might have done.

They believe our use of cheap (slave and semi-slave) labor for centuries makes it OK.

And believe that using very cheap south of the border labor is immoral.

Guilt ridden?
No way; when they say "we", they mean "they".

I don't equate picking cotton in 1850 with rare earth minerals in 2012. WTO has specific rules, if you don't intend to follow them, don't sign up. If you sign up and break them, expect to be called on it.

SJC...you may have a closer look and see how USA has twisted the North American Free Trade Agreement in the last 10 years and you may change your mind on how respectful of trade agreements we really are.

Canada signed the Tokyo Agreement and flatly refused to honor it a few short years latter to promote/support Tar Sands Operations and the current Administration.

More than half the current USA Gross National Product is made up from sales of cheap made in Asia goods (imported with borrowed $$$$B). Without access to all those low cost (almost free) products, our standard of living would take a 30+% drop overnight. Many would have to go bare footed or miss one+ meal a day.

It will get harder to bit the hand that is clothing and feeding us.

We all like to (rightfully or wrongly) believe that our justice system is far better than other nations. Not too many of us know that about 95% of (our) accused currently end up pleading guilty of lesser crimes and accepting lighter sentences instead of going to trial for grossly made up or exaggerated charges. It would be wise to have a closer look at what is happening on home before putting ourselves on a pedestal.

SJC has a very good point.

[ And it is not just the great Satan here; it's the “US, EU and Japan” ]

But maybe we miss Harv's point; Harv may have a lot to be ashamed of.

How do we accept major cartels fixing exports and price like OPEC but not the equivalent when it comes to rare earths from China.

Many products are arbitrarily controlled under so called national security or under patent rights. We invented and use most of those controls every day. Our speculators are the perfect examples of price and availability controls to make huge profits. They become heroes not criminals.

Everybody, not only OPEC and China is play the market game and it seems to be OK as long as we do it to others but not when others do it to us.

Twisted sense of justice we have?

This is a wake-up call for us to start recycling and not wasting precious rare and vital materials. There should be a systematic recycling system of all rare materials in electronics and appliances in every countries, and not simply shipping those electronic throw-aways to a third-world countries, where due to poor environmental regulation, will produce a lot of pollution.
Those mines will not last forever, and it's better sooner rather than later that we start thinking about sustainability, recycling, and renewable energy.

This is why laissez-faire economy has not worked and will not work. Economic policy will need to encompass humanity, environmentalism, and sustainability. That's why free-wheeling globalism will not work, but will need a well-regulated market economy that will level the playing field so that companies from all countries can compete fairly, without unfair advantages such as lax environmental or labor regulations from other countries. Tariffs will need to be adjusted from products coming from all countries so that local industries will not be decimated by unfair foreign competitions.

Yes, find a reason to slap a 300+% tariff on all goods manufactured at lower cost by outside competitors. That's what we have been doing for years and it is not enough to keep our inefficient manufacturing facilities going.

You can slap a 300% tariff on a $1.50 shirt made in Asia and it will still compete with the $10 shirts made in USA/Canada.

We are not an example to follow with regards to environmental issues. We have almost the highest per capita emissions, even when most of the goods we consume are made in Asia. Imagine what it would be like if everything we consume was made locally?

@HarveyD,
>>"Imagine what it would be like if everything we consume was made locally?"

That was the period after WWII when European and Japanese factories were wiped out. American industries supplied everything needed, and that was the golden time in US economy. There was still even enough industrial output left to rebuild Europe and Japan via the Marshall plan, etc, and to power the Cold War that followed.

Still, we have to appreciate and be grateful to the contributions of technology and industry of Europe and Asia to fulfill our high standard of living today. For example, China provides the world with the lowest cost in PV panels that is competitive with coal-fired electricity, and low-cost Lithium batteries as well as power electronics that will make electrification of transportation practical even today.

However, the US gov. must not let US industries be decimated by unfair advantages abroad. At least 1/2 of vital electronics, appliances and automotive markets must be made domestically in order to maintain economic stability and sustainability. Imports must not take over more than 1/2 of domestic markets. That should be the guidelines for assessing tariff on imports.

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