今年三月歐美日在世貿控告中國限製鉬的出口。才不到三個月，中國某地政府不顧當地民眾反對，出動特警，也要保證某公司能在當地開建鉬銅礦。真是巧啊。壇裏喜談陰謀論的人，怎麽連這點關聯都沒注意？愛國人士們天天談反抗西方新的經濟殖民主義，怎麽這次全啞了？
Rare Earths Tungsten & Molybdenum At Center Of US Complaint To WTO On China
Just more than a month ago (on March 13), the EU, U.S. and Japan “formally requested dispute settlement consultations with China in the World Trade Organization (WTO),” over export restrictions on rare earths, tungsten and molybdenum. The first time the U.S. knew about it was when President Barack Obama made his announcement from the White House Rose Garden that Tuesday. (Interestingly, however, at that time, Obama mentioned just the rare earths; only subsequently did we learn that both tungsten and molybdenum were also included in the referral to the WTO.) Some Observations Dr. Gareth Hatch of Technology Metals Research has done an excellent job in his piece “The WTO Rare Earths Trade Dispute: An Initial Analysis.” However, I believe that some further observations may be helpful, particularly when it comes to the background of this referral. And while Dr. Hatch has looked carefully at the possible Chinese responses and potential outcomes of the dispute, a quick look at what it could mean if either side wins may also be helpful. US Domestic Politics It is important to remember that this is an election year in the U.S. With the referral to the WTO, Obama has provided himself quite conveniently with a means to address at least two current issues in domestic U.S. politics. One of the consistent themes of the Republican presidential contenders has been the need to get tough with China. The referral demonstrates the president’s concern for domestic union workers as well as U.S. businesses, important constituencies in the coming months. Obama’s words were: “When it is necessary, I will take action if our workers and our businesses are being subjected to unfair practices.” Some observers may have been surprised not to have heard the word “defense” in any of the statements regarding this matter. I fully concur with Dr. Hatch that this was probably for good reason, not least because it deprived the Chinese the use, in its defense, of that part of Article XXI dealing with “the protection of its essential security interests.” (And indeed, it would be interesting to know just how many politicians have been cognizant of this aspect of the article in their rhetoric about the WTO issue.) Chinese Domestic Politicking Although the timing of the case might have a bit to do with U.S. domestic politics, the Chinese leadership is also currently nearing a time of transition, and one that, with all that is going on with Bo Xilai and his “family,” is proving to be somewhat challenging both to the current leadership and the Communist Party. Whatever the actual strength of China’s case for the defense may be, there is every possibility that it will come out of its corner battling very hard. Not least so that, to the Chinese population it too is being seen to be tough on those who may wish to contest what it believes to be its sovereign rights. And with the loss of its appeal to the WTO earlier this year in the other materials case, China has had the benefit of the experience of fighting what appears to have been a similar case for the last several years.
Molybdenum And Tungsten Too?
It is important to note that the WTO referral also includes molybdenum and tungsten, of which few mentions have been made in the press. Why these two also? The most important reason is probably steel.
Both molybdenum and tungsten are important in the production of certain steels.
Since 2010, the United Steel Workers (USW) had, in its Section 301 trade petition dealing with “alternative and renewable energy products,” addressed the issues of tungsten products and rare earths. Both the USW and, on the other side of the industry, the American Iron and Steel Institute, were among the first bodies to “applaud” the action against China at the WTO.
When China originally joined the WTO, Annex 6 of its Protocol of Accession did contain a number of products to which export duties could be applied. Importantly, however, none of either the rare earth or molybdenum products mentioned in the complaint to the WTO is mentioned in the annex, and the only tungsten product mentioned therein is “Ores, slag and ash: Tungsten ores and concentrates” (Export Code: 2611.00.00.00). What Is China’s Thinking? And Who Is Doing It? So far, there appear to be no really clear answers to either of these two questions. At the end of January this year (following the raw materials case brought by the EU, the U.S. and Mexico), and before the current case, China made no move to remove export restrictions on any of molybdenum, the rare earths and tungsten. This was even after the WTO’s appellate body endorsed the finding that, among other things, China’s export duties and quotas on bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorous and zinc were justified on either environmental or self-sufficiency grounds. Even though, in the case of the WTO complaints, settlement process precedent is notlegally binding, one would perhaps have thought that the chances of success in fighting any subsequent complaint on either or both environmental and self-sufficiency grounds were, for China, now somewhat less favorable. And then there is the whole issue of what China is truly trying to achieve with all its export quotas, taxes, etc. If, as still appears to be the case, the ultimate aim of its actions is to force foreign manufacturers to move to China, with the transfer of technology that entails, the country is ultimately playing a risky game. To date, it appears to have been singularly unsuccessful. With one of the most significant issues for those faced with a possible move to China being the protection of their intellectual property — about which the Japanese, in particular, are acutely aware — companies are understandably very wary indeed. But then, perhaps, China knows this and still believes the odds are in its favor. What, among other things, China’s actions have certainly not achieved, so far, are the following: Industry consolidation: A possibility in the north of the country, with “light” REEs: perhaps. There are fewer and larger producers of these. As for “heavy” REEs in the south of the country: a struggle. In the case of these last, not least as pointed out in an excellent piece in China Perspective because: “ … rare earth producers in southern China are similar in size and competitiveness, and local governments are loath to support cross-province mergers.” Beijing may want to exert control from the center, but its ability so to do in the case of rare earths is, as so often, considerably less than total. Money and vested local interests create a strong epoxy. An end to smuggling: As Metal-Pages so correctly pointed out back in January this year: “ … for as long as China sets all kinds of taxes and quotas on rare earths there will always be a strong incentive for smugglers who will find all kinds of creative ways to get around the rules.” According to the same piece, the figures for smuggling are not insignificant: “Various industry estimates put rare earth smuggling at something like 20,000 tonnes a year, a staggeringly high figure when set against China’s official annual export quotas coming in at around 30,000 tonnes.” Control of production: By extension, whatever the correct figure may be for smuggling, all indications are that the center’s control over production (especially of small, illegal or “unofficially” sanctioned mines), too, still lacks effectiveness. As with Beijing’s efforts regarding overall industry consolidation, in a sector as fragmented as that of rare earths in China, local and regional interests remain (or have become) both sufficiently entrenched and strong to stymie efforts to cut production. Apart from those actually doing the mining, too many people depend on the revenue streams. Control of pricing: If, as a number of people have opined, one of the reasons for China’s actions is to enable it to control not only production (which it already did), but also pricing (which it arguably did not), then once again, its actions have been signally ineffective. And unfortunately, to those using any raw materials, few things are as abhorrent as unreliable supply and price volatility. As for where the thinking is actually coming from, its lack of coherence is perhaps telling: Of the various explanations of the situation, that provided by Scott Kennedy of GK Dragonomics and reported on in an article in The Wall Street Journal at the end of January, in which he suggests that “China’s rare-earths policy is the product of bureaucratic wrangling among at least four different government agencies, rather than a grand mercantilist strategy” seems entirely plausible. At the very least, one would have expected any such strategy, if there was one, to have been considerably more effective. Winner Takes All? Hardly! Whichever side prevails, what are some of the possible consequences, and the issues that most probably will still need to be addressed? As food for thought: The EU, Japan And The US ‘Win’ China ‘Wins’ Afterword In all the reporting of the case in the mainstream press, one of the most interesting statements was that of Dr. Chen Zhanheng quoted in China Daily: “If China loses the case, it will bring with it more problems related to management of industries and trigger intense competition among the domestic companies … China will have to supervise and manage the whole production chain better to ensure healthy and sustainable development.” Goodness! Whatever happens, we should not hold our breaths.
