Ample Wisdom on Rare Earths; China discovers rules-based trade works for resources, too.
April 11, 2014 Leave a comment
Ample Wisdom on Rare Earths
China discovers rules-based trade works for resources, too.
Updated March 27, 2014 4:15 p.m. ET
Beijing’s mercantilist resource policies suffered another blow on Wednesday when the World Trade Organization struck down China’s limits on the export of rare-earth metals. The ruling is better news for China than it appears.
The case concerns China’s attempts, starting in 2010, to limit exports of the metals, small quantities of which are important in a range of high-tech applications from smartphones to wind turbines. China sits atop roughly a quarter of global reserves but accounts for 90% of global supply. So trading partners worried when Beijing began imposing steep export tariffs and more restrictive quotas. For a time in 2010, Beijing also tried to cut off exports to Japan as the two countries traded shouts in a maritime territorial dispute.
Beijing argued in the suit filed by the U.S., EU and Japan that the export controls—which are usually not allowed under WTO rules—were imposed for environmental reasons. Such considerations may have played some role in Beijing’s actions. Rare earths are dirty to extract, and China has suffered significant soil, air and water problems from widespread wildcat rare-earth mining.
But Beijing didn’t impose similar restrictions on rare-earths use at home. This led to well-grounded suspicions that the real aim was industrial policy: to encourage foreigners to build high-tech factories in China where they would be assured of rare-earth supplies.
The ruling by the WTO’s three-judge panel strikes down the export restrictions, environmental considerations notwithstanding. Beijing has 60 days to appeal, which it likely will. If the ruling is upheld, Beijing will have to change its rules or face stiff retaliatory tariffs.
Despite any embarrassment Beijing may feel over its loss, the ruling’s overall message is one from which Chinese leaders can take heart. The WTO panel affirms that the normal rules of free trade apply to natural resources as much as to manufactured goods, and that the WTO will enforce those rules.
For a country that’s chronically neurotic about its access to imported resources, this should be a reassuring message. Now Beijing can do its part to contribute to a rules-based trade in resources by quickly complying with the WTO’s rare-earth ruling.
About bambooinnovator
Bamboo Innovator 