China-West: A New Trade War? – OpEd

By Konstantin Garibov

The United States has sued China in the World Trade Organization over tougher quotas for rare earth metals exports.

Washington argues that export restrictions on rare earths, in particular wolfram and molybdenum, are pushing prices for rare earth minerals up. The European Union and Japan supported the lawsuit.

Meanwhile, Beijing rejected the accusations. The Commerce Ministry explained on Thursday that the export quota regulations were needed to reduce the impact of rare earth metals production on the environment and enable China to control its nonrenewable resources.

China accounts for 90% of global trade in rare earth minerals, selling them at advantageous prices. The United States complains that Chinese companies get rare earth metals at lower prices than foreign firms, the latter having to pay extra duties and coming under pressure to open production to China, which hampers the freedom of trade.

Anton Safonov, a senior analyst for the InvestCafe agency, believes that the dispute can be solved within the WTO framework and is unlikely to spark a new trade war.

“The United States and China are old foes. They have been picking at each other for a long time, yet refraining from serious action. Both are recriminating against each other over protectionism and breaching common accords, but things haven’t gone beyond that.”

As long-time trade partners the U.S. and China are not interested in further escalation of tensions, says analyst Ludmila Boni of the Russian Institute of Far Eastern Studies.

“Competition and cooperation go hand in hand in the US-China relations. I think there will be no trade war between them.”

Both experts told the VoR that a case filed by the US, Japan and the EU against China at the WTO should not be viewed as politicized since it is aimed at protecting the countries` economic interests.

Nevertheless, access to rare earths, which are vital to the manufacture of high-tech products from hybrid cars to flat-screen TVs, is turning into a geopolitical problem. China and Japan were on the brink of a new trade war last year, when the world’s largest producer of rare earths, the Baotou Steel Rare-Earth Group) suspended production in hopes of boosting falling prices of the exotic minerals. Japan imports over 90% of rare earth minerals from China each year. The incident then encouraged Japan’s largest carmaker Toyota to produce hybrid engine cars without using rare earths and thus weaken the industry’s dependence on Chinese exports. It is evident, however, that the problem with China’s rare earths exports has not been solved, causing worries among the WTO member states.