A bastnaesite mineral containing rare earth is pictured in a Tokyo laboratory. The United States, Europe and Japan joined forces on March 13, 2012 to challenge China's restrictions on exports of rare earth minerals critical to the manufacture of advanced technology.Reuters
The confusingly named substances known as "rare earths" – blame, ultimately, the Sicilian Greek philosopher Empedocles and his theory of the four elements – are a good subject for a World Trade Organization lawsuit. On Tuesday, the United States, the European Union and Japan commenced an action about a Chinese export restriction, though the prices of rare earths are currently falling. China ought to be held to its obligations to comply with the international trading system, and the rare-earths action is the proper way to make that point.
The market has been working to counteract China's rare-earths export quota. China had obtained its dominant position mostly by low prices, not by any monopoly of rare-earth deposits. In due course, the high prices of Chinese rare-earths exports have lowered demand for them, and encouraged non-Chinese firms to look for, produce and sell more of these commodities themselves – a process in which Canadian companies – Avalon Rare Metals Inc., Great Western Minerals Group Ltd., Neo Material Technologies Inc., Quest Rare Minerals Ltd., among others – are taking an active part.
But China's rare-earths quota is a direct contradiction of a WTO rule that, as Lawrence Herman of Cassels Brock LLP points out, goes back to the postwar General Agreement on Tariffs and Trade of 1947; if a member-state imposes an export restriction, it must also limit its domestic supply – in China, in this case – so as not to discriminate. In fact, China is keeping its internal rare-earth prices low and its supply correspondingly high – a manifest preference for its own national market.
Since China joined the WTO in 2001, its government has not shown itself to be an arrant scoff-law. The proceeding by the U.S., the EU and Japan, still at a very early stage, may well achieve its salutary purpose.