2012-03-15 09:10:00

The New Opium War: China's Rare Earth Minerals

HONG KONG - China is facing a trade complaint in the World Trade Organization (WTO) for imposing quotas on its export of rare earth elements. Filed in Geneva by major economic powers – the United States, Europe Union and Japan – the case has a direct impact on the global economy since these trace minerals are key to miniaturizing high-tech electronic components. Without their mix into metal alloys, the ipad would be as big as an old cathode-ray TV and smart phones as thick as a brick.

Rare earths are important enough to Silicon Valley for President Barack Obama to jump into the fray. “American manufacturers need to have access to rare earth materials which China supplies,” he announced in a new trade case against China on Tuesday. “Now if China would simply let the market work on its own, we’d have no objections.”
Yet the president knows for a fact that the ideal of a global free market remains a distant dream in a world dominated by producers’ cartels. China itself, hammered by rising steel-making costs, has tussled with the iron-ore bloc formed by large mining companies in Australia and Brazil. OPEC, which sets the world price for petroleum, is the mother of all cartels. King Cotton, based in the United States, has overseen the worldwide destruction of the textile hemp industry under the pretext of the war on drugs. Other types of contraband are cartelized, Medellin being the price-fixing group for cocaine. So far, the WTO has not acted against any of these long-standing cartels.

Acting as a single-nation cartel, the People’s Republic produces 97 percent of the group of 17 types of minerals, which include gadolinium used in computer chips and the neodymium essential for tiny super-magnets. Whatever the alarms raised by several American defense analysts, the Chinese export controls are not part of a belligerent strategy or economic sanctions similar to those the West has imposed against China, such as forbidding the sale of dual-use high-tech equipment, for example.

Health Risks

Beijing limited foreign shipments due to shortages caused by “environmental issues” and “health hazards” to miners, according to news reports. The toxic threats of water contamination and air pollution are serious enough for other countries with rare-earth resources to block plans for extraction. In Malaysia’s Pahang state, for instance, thousands of villagers are now protesting the planned $230 million refining plant by Australian-owned Lynas, the first new rare-earth operation outside of China. Local residents claim that the open-pit mine releases radioactive dust and carcinogenic wastewater.

The problem of downstream contamination – and not the lack of potential mining sites – is the reason that China has been left with a near-monopoly on rare earth mining. Before 1990, before other nations suspended their mining operations, China produced less than 30 percent of the world supply.

The very same “humanitarian” countries that complain so vociferously about workers’ rights and environmental degradation in China have silently tolerated the cancer risk to expendable Chinese miners. The Western message is clear: Hurry up and do the dirty work but not in our backyard.

In a further cynical twist, the European Union trade commissioner Karel De Gucht said that China’s restrictions on rare earths harm “green business applications.” (CITE SOURCE) In fact, most of the world’s photovoltaic cells are produced inside China, often in partnership with Western companies. Likewise is the case of neodymium magnets, abundantly available at low cost through web marketing sites. Foreign companies can thereby profit while washing their hands of the high costs for pollution clean up and health care.

Japan took the lead in calling for punitive action after the Chinese government curbed rare-earth exports in the wake of a mid-sea collision between a Chinese trawler and Japanese coast guard vessels near some disputed islands. Whether or not the export ban was in retaliation for the fishermen’s detention is a moot point, since a short-term economic slap is far preferable to Beijing dispatching warships and submarines to settle the territorial dispute.

Feeding the War Industry

If other nations refuse to dig out their own rare-earth reserves, then why are the Western powers pushing for a WTO action against supplier China? The dispute has little to do with consumer electronics. The underlying cause for this trade war can be narrowed down to military technology. The United States, EU and Japan are major weapons producers, and fast, light and accurate killing machines are built of rare earths from China and strategic metals like cobalt from Africa.

War is good for business, but the military assaults on Iraq, Afghanistan and Libya have consumed the world supply of rare earth – and that means Chinese miners cannot produce enough of the toxic elements for the West’s defense industry. The combined Western arsenal of attack aircraft and armored vehicles contains enough scandium in jet engines, lanthanum inside digital lens used for targeting, and yttrium and terbium in the phosphors that light cockpits to supply the world demand for game consoles over many decades to come.

Reverse Sanctions Needed

If, instead of buckling under pressure from the WTO, China were to permanently halt rare earth exports, the cost of weapons systems would become prohibitive for indebted Western countries. Simply by stopping the flow of exports, the Chinese could give peace a chance. Meanwhile, debt-strapped consumers are better off without the temptation of mobile phones with more apps, and saving their money instead for basic necessities.

As for the view from Asia, the Western demands for the strategic minerals are reminiscent of the Opium War era when the Chinese had a monopoly on tea production and the English wanted all the tea in China. Since the sum total of pound sterling could not equal the insatiable demand for the brew, the British troops invaded. If the fate of mineral-rich Africa provides any indicator of what’s to come after the WTO complaint, China should leave the rare earth where it belongs – in the ground.

Yoichi Shimatsu, former associate editor of Pacific News Service, is an environmental writer and consultant based in Hong Kong.

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