In Chapter 10 of your textbook, there is a Headlines segment titled “China Ends Rare-Earth Minerals Export Quotas.”
Please read this article in your textbook, and then do further research on the 17 rare earth minerals that are discussed in the article. Explain what China is doing with the rare earth industry, and come up with a proposal to counter China’s actions. Does the United States have an extensive rare earth industry? If not, what would you do to grow this industry and protect it? How could import quotas increase domestic prices of rare-earth minerals?
Your case study should be at least three pages in length. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations. Cite at least one resource from the CSU Online Library.
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China Ends Rare-Earth Minerals Export Quotas
China has dropped decade-old quotas limiting exports of strategically important minerals that sparked a global trade dispute and led some countries to reduce their reliance on Chinese supplies. The shift comes after Beijing lost a dispute at the World Trade Organization in 2013. But the policy also proved to be of little value for Beijing as many countries found other sources for the materials known as rare earths, which are widely used in high-technology industries such as smartphones and missile systems. “The change is likely because of the pressure from the WTO decision,” said Frank Tang, an analyst at investment bank North Square Blue Oak. “China is saying that as a WTO member, it’ll have to abide by WTO rules.”
The quota system was once a major global trade issue. In 2010, China pushed global rare-earth prices sharply higher—in some cases tenfold—when it slashed its export quota on the 17 elements by 40% from the preceding year. China has said it was an effort to clean up a highly polluting domestic rare-earth mining industry. The Obama administration described the move as a “wake-up call.” Trade complaints followed, adding rare earths to a raft of items—including car parts and solar panels—that have been the subject of friction between China and its trading partners in recent years. The U.S., European Union and Japan in 2012 complained that China was using the quota to push up global rare-earth prices in violation of WTO rules.
But since then the world has reduced its reliance on the minerals from China, which until recent years produced about 93% of the world’s rare earths. China’s share of global rare-earth output has fallen to around 86% as other producers amped up supply. China’s exports now frequently fall short of maximum levels under the quota system. In 2012, it eased quota restrictions. But after it lost the WTO case, government officials said the quota’s days were numbered.
Source: Republished with permission of Dow Jones & Company, Inc. From “China Ends Rare-Earth Minerals Export Quotas,” by Chuin-Wei Yap, Wall Street Journal, January 5, 2015, online edition. Permission conveyed through Copyright Clearance Center, Inc.