WASHINGTON – Let’s be honest: “Rare Earths Elements” is probably the best name that has ever been given to a group of chemical elements. But rare earths elements (REE) are not actually rare. Even the rarest element of this group of 17 elements, Lutetium, is still more abundant than gold or platinum. So, why would the United States, European Union, and Japan take China to the WTO on the rare earths issue?
This is a critical short-term issue. Demand is expected to double by 2014 in order to feed growing appetites for iPads and other high-tech products. China currently produces some 95 percent of REE worldwide. The United States and Malaysia plan to open new mines, but it will take a few years until production will be operational. Plus it’s a dirty business. Toxic and radioactive substances have to be handled and may be released into the water and air. New sites, therefore, are highly controversial.
The irony is that China will probably claim to reduce its production in order to regain control of its industry so that it can figure out how to decrease the environmental damage caused by rare earth mining. Meanwhile, the rest of the world needs these REEs, at least partly to help clean up the environment through innovative green technologies where REE are applied. REEs are especially needed for automotive catalysts and fluorescent lamps, and they are increasingly important in high-strength permanent magnets, computer hard disk drives, hybrid cars, wind turbines (here particularly neodymium), flat screen and touch screen technologies, as well as in military applications.
So, here’s the way out: In the short run and after the first dust of this WTO case settles, the United States, the EU, and Japan should help China find ways to produce rare earth elements in an environmentally sound manner. In practical terms, we could offer cleantech to deal with toxic and other substances in addition to advisors to help with capacity building (e.g. experts, administrative support). This should be accompanied by attempts to increase mining at home and in other places, and to establish recovery and recycling mechanisms both domestically and internationally. In the mid run, an international compact on recovery and recycling of high tech products and other goods that contain metals should be negotiated.
The alternative, a formal dispute settlement process at the WTO will last a long time and may not deliver the expected result. Some people may claim this China-bashing is all the result of electoral politics in the United States. The truth is, however, that there are many more reasons to engage China in an improved management of commodities. And our suggestion may pay off if price increases due to export restrictions and more severe side-effects (such as a trade war) can be avoided.
Raimund Bleischwitz is a senior fellow at the Transatlantic Academy in Washington and Co-Director at the Wuppertal Institute in Germany