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U.S., EU and Japan protesting China’s rare earth policy

David Brancaccio Mar 13, 2012

David Brancaccio: It takes a lot of what are called “rare earths” to make the electronics that keep us going in the 21st century. The Obama Administration believes China is holding back its supply of these special metals to drive up prices. And now the U.S. , the European Union, and Japan are taking their beef about China to the World Trade Organization. President Obama at the White House announced the WTO complaint just now.

Barack Obama: When it is necessary, I will take action if our workers and our businesses are being subjected to unfair practices.

A senior Chinese official said the export restrictions targeted no particular country and made it clear China will fight this.

Joining us is China expert Matthew Slaughter, associate dean at the Tuck School of Business at Dartmouth. Hello, Professor Slaughter.

Matthew Slaughter: Hello, thank you for having me on.

Brancaccio: This can’t just be about rare earth minerals — what’s the larger dispute here?

Slaughter: You’re definitely right — there’s a larger context that’s really important to keep in mind, which is the overall China-U.S. economic relationship. And from the U.S. side, in recent months, we’ve seen many government leaders — both Democrats and Republicans alike — sound increasingly hawkish and protectionist against China. But that presents some real economic risks for the United States and China as well.

Brancaccio: Now, mining these minerals makes an environmental mess, and China contends it has to limit output of this stuff to limit the environmental degradation. Any truth to that?

Slaughter: So there is truth to that, and that’s important in this particular case, because — given the current rules of the World Trade Organization — one legitimate reason a country can limit its exports to the rest of the world is if production of a particular product generates a lot of environmental damage in that country.

So that’s one of the issues in this case that will require some sorting out — in addition to the economic issues of: is this damaging other countries; is it raising world prices of rare earths; and how important is that damage relative to the environmental concerns.

Brancaccio: Matthew Slaughter at Dartmouth. Thank you very much.

Slaughter: Thanks very much for having me.


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