China’s restrictions on the export of rare earths used in the manufacture of cellphones and radar are being targeted by the US Trade Representative for a potential trade case, industry representatives said.
The US has asked business groups and unions to provide evidence that China is hoarding these elements for a case that may be filed at the WTO, said 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 US, the Government Accountability Office (GAO) 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 US trade office said in its annual report on overseas trade barriers in March.
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 yesterday in a telephone interview from Beijing. The society is composed of Chinese academics who study the industry.
“It’s pointless for the US 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.”
US 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 US-China Business Council, said in an interview.
Frisbie said he didn’t know if the US would file a WTO case.
The US 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 (胡錦濤) is set to meet with US President Barack Obama and other world leaders at the G20 meeting in Toronto on Saturday and Sunday.
Rare earths are a group of 17 chemically similar metallic elements, including lanthanum, cerium, neodymium and europium. The US was self-sufficient in these materials until the mid-1980s, when lower labor and regulatory costs helped China’s climb to dominance, the US 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 US, 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,” 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 EU 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.”
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