Many ways to level a playing field
The other morning I read the expected news that the WTO is proceeding with its probe of the Chinese rare earth industry in response to a complaint brought on by the US, Japan, and the European Union. This action was initiated earlier this year, and will continue for many months to come. The timing was actually surprising to me, particularly since the worldwide demand coming into 2012 was so much lower than the export quotas in place. Pricing of rare earth metals are down, too, and even as the world (outside of China, that is) is shocked that China may be creating a strategic reserve, the rare earth prices have yet to respond. Demand is just that sluggish right now.
I'm not a fan of this specific WTO action. Where some might see China as violating WTO rules, guarenteeing the country's own industries unfair advantages in pricing and availability, many people and companies outside of China have seen opportunity. Companies based in the US like Molycorp, and in Canada like Great Western and Avalon, among several others around the world, have the capability to supply rare earth metals in volume, but have not been able to compete with the Chinese companies previously. As the prices of most of the rare earth materials climbed to ridiculous highs last summer, miners outside of China were eager to court investors. At long last, it seemed, rare earth suppliers outside of China could compete on price with those exporting out of China. Yes, this is a very strange scenario, as the "unfair practices" have actually worked in favor of international competition.
So what could come from the WTO ruling in favor of the complainants? Who actually wins? At lower prices (which by the Chinese government's admission have been artificially low), the source for rare earths remain the Chinese mines. That's exactly how we got here in the first place.
I'm not a fan of this specific WTO action. Where some might see China as violating WTO rules, guarenteeing the country's own industries unfair advantages in pricing and availability, many people and companies outside of China have seen opportunity. Companies based in the US like Molycorp, and in Canada like Great Western and Avalon, among several others around the world, have the capability to supply rare earth metals in volume, but have not been able to compete with the Chinese companies previously. As the prices of most of the rare earth materials climbed to ridiculous highs last summer, miners outside of China were eager to court investors. At long last, it seemed, rare earth suppliers outside of China could compete on price with those exporting out of China. Yes, this is a very strange scenario, as the "unfair practices" have actually worked in favor of international competition.
So what could come from the WTO ruling in favor of the complainants? Who actually wins? At lower prices (which by the Chinese government's admission have been artificially low), the source for rare earths remain the Chinese mines. That's exactly how we got here in the first place.
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