China's rare earths export restrictions has united the United States, Japan, and the European Union to take action via the WTO for the first time. The united front is, however, unlikely to change global supply of the critical materials any time soon.
China's domination of the rare earth market has united the United States, Japan, and the European Union in what may turn into a drawn-out legal dispute. Last week, President Barack Obama announced that the powers were joining forces before the World Trade Organizationfor the first time in order to challenge Beijing's policy on the restriction of rare earth exports. “American manufacturers need to have access to rare earth materials - which China supplies,” Obama said in the White House Rose Garden. With China controlling well over 90 percent of the 17 elements that are critical in industry, especially for defense purposes, the consultations with China requested by the US, European Union, and Japan under the auspices of the Geneva-based organization will be closely watched not just by commodities investors, but also by policymakers and defense analysts alike. China's policies to limit exports of rare earth “hurt…manufacturers of pioneering high-tech and 'green' business applications,” said European Union Trade Commissioner Karel De Gucht. Indeed, Obama's very public announcement of the decision highlights the importance the administration places on the current situation in the rare earth market, said Yaron Vorona, Executive Director of the Institute for the Analysis of Global Security's Technology & Rare Earth Metals Center, which held a two-day conference on the industry last week in Washington, DC. Obama is “on track…with a narrow focus” in regards to resolving the imbalance in the global rare earth market, said Jonathan Ossoff, Senior Legislative Assistant for Hank Johnson, a Democratic member of the House who represents the state of Georgia. Johnson is a co-chair of the House Rare Earth Caucus, and introduced the Resource Assessment of Rare Earths Act of 2011, which directed the US Geological Survey to conduct a comprehensive three-year global mineral assessment of rare earth elements in an effort to jump-start the industry within US borders. The problem is that in recent years, the US has grown increasingly dependent on China for rare earth, and private US, European, and Japanese companies have steadily retreated from the market as public opposition to potentially environmentally hazardous rare earth mining has intensified. These circumstances have allowed Chinese companies to undercut their US, Japanese, and European counterparts pricewise in the international market. As such, even if China is forced to increase exports amid increasing pressure from the WTO, non-Chinese manufacturers would likely remain heavily dependent on Beijing for critical materials.