Officials in Beijing said Tuesday that China will vigorously defend its right to control the export of such materials. The official state-run news agency, Xinhua, warned that any U.S. move to lodge a trade complaint over the issue would “backfire.”
In choosing to make a stand, U.S. officials are highlighting an industry over which China has a near-monopoly. The country now produces more than 95 percent of the world’s rare-earth minerals, which are used in almost all advanced industrial products, from helicopter blades to solar panels to the batteries in electric cars to flat-screen televisions.
And China has shown in recent years that it is not afraid to use its dominance in the crucial market as a cudgel. In 2010, during a territorial dispute with Japan, the Chinese government halted the shipment of anything containing so-called “rare-earths” to Japan, causing a temporary panic among electronics manufacturers.
China has only about 30 percent of the world’s known rare-earths deposits. But other countries, including the United States, Canada and Australia, stopped mining more than a decade ago, because the price of the Chinese-produced rare earths was cheaper.
“If China would simply let the market work on its own, we’d have no objections,” Obama said during his remarks. “But their policies currently are preventing that from happening. And they go against the very rules that China agreed to follow.”
Obama added: “Being able to manufacture advanced batteries and hybrid cars in America is too important for us to stand by and do nothing. We’ve got to take control of our energy future, and we can’t let that energy industry take root in some other country because they were allowed to break the rules.”
Global buyers were rattled in 2009 when the Beijing government announced it was setting a quota on rare-earths exports, ostensibly to protect the environment and stop over-mining.
Critics saw the move as an attempt by Beijing to flex its economic muscle, aiding Chinese companies that use rare earths while driving up the costs of the metals to the United States and other countries. Beijing has also stopped issuing any new licenses for mining of rare earths, closed some illegal mines and set production caps for the metals.
In recent years, China’s stance on trade of rare earths has prompted some countries to start ramping up their future production.
The Obama administration argues that China’s export restrictions give Chinese companies an unfair advantage. The action against China comes during a U.S. election year in which Obama’s potential Republican opponents are lodging pointed accusations of unfair trade practices by China. The president has vowed in recent weeks to level the economic playing field.