China Rare Earth Limits Said to Be Targeted by U.S.
China’s restrictions on the export of rare earths used in the manufacture of cell phones and radar are being targeted by the U.S. Trade Representative for a potential trade case, according to industry representatives.
The U.S. has asked business groups and unions to provide evidence that China is hoarding these elements for a case that may be filed at the World Trade Organization, according to the people, who asked not to be identified because the talks were confidential.
China controls 97 percent of production of the materials, known as rare earth elements, giving it “market power” over the U.S., the Government Accountability Office said in a report in April. China restricts exports of the elements through quotas and export taxes of as much as 25 percent, the GAO said.
“The export restraints can artificially lower China’s domestic prices for the raw materials due to significant domestic oversupply,” the U.S. trade office said in its annual report on overseas trade barriers in March.
Nkenge Harmon, a spokeswoman for the U.S. Trade Representative’s office, declined to comment. China’s Ministry of Commerce didn’t immediately reply to a faxed request today for comment.
China restricts the mining and export of rare earths to protect the environment and minimize pollution, Liu Aisheng, director of the Chinese Society of Rare Earths, said today in a telephone interview from Beijing. The society is composed of Chinese academics who study the industry.
“It’s pointless for the U.S. government to complain to the WTO about China’s restrictions,” Liu said. “Chinese policy is unlikely to lead to severe supply shortages given that China will continue to export and other countries will also catch up in production as long as there’s demand.”
U.S. Trade Representative Ron Kirk and Commerce Secretary Gary Locke are scheduled to testify about China at the Senate Finance Committee tomorrow, following growing criticism from lawmakers that China’s trade policies discriminate against American producers.
“If Congress is concerned about enforcement of trade rules, then WTO cases demonstrate the approach we have been talking about,” John Frisbie, president of the U.S.-China Business Council, said in an interview. Frisbie said he didn’t know if the U.S. would file a WTO case.
The U.S. trade office put together a trade complaint against China over credit-card processing in March, and has yet to file it. Chinese President Hu Jintao is set to meet with President Barack Obama and other world leaders at the Group of 20 meeting in Toronto on June 26-27.
Rare earths are a group of 17 chemically similar metallic elements, including lanthanum, cerium, neodymium and europium. The U.S. was self-sufficient in these materials until the mid- 1980s, when lower labor and regulatory costs helped China’s climb to dominance, the U.S. Geological Survey said in a report.
The elements are used in radar, high-powered magnets, mini hard-drives in laptop computers, catalytic converters for vehicles, electric-car batteries and wind turbines.
A rare-earth mine in the U.S., in Mountain Pass, California, shut down most operations in 2002. Molycorp Inc., which owns the mine, plans to reopen it this year, the company said in a prospectus yesterday.
“China’s rare earths deposits are big, but it’s not the only country that has deposits,” the Chinese Society of Rare Earths’s Liu said. “Gradually, supply and demand will reach a new equilibrium.”
Global consumption of rare-earth elements “is projected to steadily increase due to continuing growth in existing applications and increased innovation and development of new end uses,” Molycorp said in a regulatory filing.
The European Union released a report this month saying that supplies of raw materials such as rare earths, while “essential for the EU economy,” are “increasingly under pressure.”
The U.S. and EU filed a joint complaint last year against Chinese curbs on the export of raw materials such as magnesium, coke and zinc used in making steel and other goods.
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