China Flexes Trade Muscles With Rare Earth Export Cut Last month, Beijing blocked shipments to Japan following a diplomatic dispute. Now, reports are emerging that China has also cut back on rare earth exports to the U.S. following an investigation into complaints Beijing is unfairly favoring its green industry sector.
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China Flexes Muscles With Rare Earth Export Cut

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China Flexes Muscles With Rare Earth Export Cut

China Flexes Muscles With Rare Earth Export Cut

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To a trade dispute with China now over its export of so-called rare earth minerals. They're widely used in high-tech manufacturing. Last month, China blocked shipments to Japan. That move followed Japan's detention of a Chinese captain whose boat had ventured into Japanese waters. This week, some Western officials say China has also been cutting back on rare earth exports to the U.S. and Europe.

NPR's Tom Gjelten reports on what some fear is a case of China using trade as a weapon.

TOM GJELTEN: When international traders talk about rare earth metals, they're not being entirely accurate. These elements - tungsten is one example - are found all over the world and in relative abundance.

But rare earth mining is difficult and dangerous. For the last 10 or 15 years, China's had a near monopoly on the business, accounting for more than 95 percent of the world's production. That gives China tremendous leverage because the demand for rare earth elements is skyrocketing.

Mr. YUKON HUANG (Senior Associate, Carnegie Asia Program ): IPods for example use rare earths, wind turbines, batteries, magnets, lasers, equipment for high definition TVs.

GJELTEN: Yukon Huang was formerly the lead economist for Asia at the World Bank. Rare earth minerals, he says, may be the best example of a commodity that China has and others need.

Mr. HUANG: It's going to be a tightening market in the coming years. Production cannot ratchet up very quickly. So China is in a position of saying, well, given the limited amount that I'm going to export, who should I sell it to?

GJELTEN: The concern is that China will make that call on the basis of political considerations like some other countries do with oil exports. Chinese officials acknowledge they are cutting back on rare earth exports. They say it's a general policy in order to preserve those minerals for their own industrial production.

But Kenneth Lieberthal, a China expert at the Brookings Institution, says even that explanation suggests China is increasingly engaging in a kind of economic nationalism.

Mr. KENNETH LIEBERTHAL (China Expert, Brookings Institution): In the past, they said we are a reliable long-term supplier of these rare earth metals. So there's been a shift in Chinese perspective here. The shift is a significant one.

GJELTEN: Last week, the Office of the U.S. Trade Representative announced it was investigating complaints that China is unfairly favoring some of its own green industry sector.

The Chinese government loudly objected, and then yesterday the New York Times cited industry sources saying China has now cut back on rare earth shipments to the United States. That led some to wonder whether China was again using its rare earth export practices as a weapon against a rival.

Yukon Huang, now at the Carnegie Endowment for International Peace, says it would not be surprising.

Mr. HUANG: One could also imagine that you were a ministry of commerce official supervising the export of limited supplies, and you have buyers who want them, and you have a choice between serving buyers where you feel the countries' diplomatic relationships are very strong, you might be more willing to be flexible in those cases.

And where you have political problems, you might very well say, well, why should we actually do anything for you?

GJELTEN: The concern over China's policies comes at a time when its role in the global economy is dramatically increasing. Kenneth Lieberthal, who served on the National Security Council under President Clinton, says one of the big questions right now is what rules China is going to play by.

Mr. LIEBERTHAL: My hope certainly is that the Chinese will end up being very constructive participants in the global arena. But where they have a tendency to leap easily to using, for example, trade policy to make political points, I think that all of us have some work to do to try to get that back in a more constructive framework.

GJELTEN: Of course, to the extent China will now be using trade policy in part for political purposes, it would not be alone. The United States routinely does the same thing every time it imposes trade sanctions on an adversary.

Tom Gjelten, NPR News, Washington.

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