This post was written by Miriam Roth, a Harris & Moure paralegal. Miriam graduated last year with a slew of honors and a degree in English Literature from the University of Maryland. When not working with us, she is an assistant editor at PIF Magazine.
By Miriam Roth
China Law Blog co-editor Steve Dickinson joined Katie Fischer of Blue Ocean Network’s Chinalogue on Monday to discuss the issue of rare earths. Click here to watch the entire video.
Along with John Gong, Professor of Economics at the University of International Business and Economics, Steve spoke about the implications of China’s long-standing monopoly over the rare earth industry. The world relies on China for about 97% percent of its overall supply of rare earths, seventeen materials used in a wide variety of products. That figure, compounded with talk of China initiating tighter export quotas, is making the international trade community pretty nervous. And with good reason: rare earths are critical for the production of all kinds of high-tech equipment, from iPads to missiles. It seems strange that countries like the U.S., whose defense industry alone consumes five percent of the rare earths in the world, have been willing to place their supply of such crucial materials in the hands of a single trade partner. Especially because, as Steve points out, rare earths are not actually that rare.
In fact, 64% of the world’s supply of rare earths lies outside of China. What’s more, as they are found relatively close to the earth’s surface, rare earths are relatively easy to mine and extract. The precious commodity, then, Steve explains, isn’t the material itself. Rather, it’s China’s willingness to bypass environmental and labor restrictions. The initial stages of processing these materials pose serious threats to both the environment and to human health, so it’s no surprise that many countries have taken a “not in my backyard” approach to rare earths despite their dependence on them.
Though China sits on a large portion of the world’s rare earths, it is ultimately the “China price” of those resources that both attracts and frustrates its hungry trade partners. Steve points out that China’s rare earths industry is controlled not by a single state-run agency, but by a “race to the bottom” between a cluster of companies who compete with one another by lowering and lowering prices, even below the profit margin. At this point, no other country is willing to take the kinds of environmental, legal, and economic risks that China is in order to export large amounts of rare earths.
Due to rumors of stricter export quotas, and following a recent (and ambiguous) twenty-day embargo on rare earth shipments to Japan during a period of maritime tensions, these issues are coming to a head on the international stage. With global demand increasing, even the U.S. is scrambling to re-open its own rare earths facilities. Though Steve and Professor Gong didn’t quite see eye to eye on China’s intentions regarding rare earth quotas, both agreed that China’s current monopoly likely will give way to some much-needed diversification.
I urge everyone with an interest in rare earths to watch the entire video.
