Wednesday, October 20, 2010

China Quietly Retaliates Against US Trade Actions

This is why we have to step lightly when it comes to dealing with China on trade issues - they already have us by the throat. Hours after the Obama administration indicated that they would be looking into the trade complaint filed by the US Steelworkers that China was illegally subsidizing renewable energy exports, the Chinese government swiftly retaliated by imposing an quasi-embargo on rare earth elements needed for advanced manufacturing.

China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted some shipments of those materials to the United States and Europe, three industry officials said this week.

When did they do this? First thing Monday morning, after meeting over the weekend to denounce the US action. They had been tightening some screws previous to this, but these are "new restrictions", as of this week. And it's not really an embargo, you see; they are letting some shipments out for reasons known only to themselves, while tightening up "customs inspections" that are halting others. That makes it almost impossible to bring a case before the WTO because it is not a defined policy of the Chinese government.

Despite a widely confirmed suspension of rare earth shipments from China to Japan, now nearly a month old, Beijing has continued to deny that any embargo exists.

Industry executives and analysts have interpreted that official denial as a way to wield an undeclared trade weapon without creating a policy trail that could make it easier for other countries to bring a case against China at the World Trade Organization.

Rare earth elements are used in the manufacturing of "broad commercial and military applications" such as cell phones, large wind turbines, electric car components (ahem), and - here is the big one, where we really may have screwed up - guided missiles. China has imposed steady reductions on exports of rare earth elements since 2005, has slapped a huge export tax on them as well, in effect forcing multinational corporations to manufacture high-tech goods in China. This is part of the investigation of the complaint filed with the Obama administration. Chinese officials are denying this slowdown has anything to do with trade though, oh no - it's all about protecting the environment! After capturing 95% of the world's mining operations in rare earth elements, it just now dawned on the Chinese that this is bad for the planet, and they have to impose restrictions on it. It has nothing to do with trade, you lackey imperialist Yankee dogs you. So get a grip.

“With stricter export mechanism gradually in place, outbound shipments to other countries might understandably begin to feel the effect,” (Wang Baodong, a spokesman for the Chinese Embassy in Washington) said in an e-mail. “But I don’t see any link between China’s reasonable rare earth export control policy and the irrational U.S. decision of protectionist nature to investigate China’s clean energy industries.”

See? They are "reasonable", we are "irrational" and "protectionist". And we haven't even filed anything yet. Can't wait to see what happens if we do.

And here is the kicker - we brought this on ourselves. "Rare earth" is not really rare at all; we just sold out all our mining and manufacturing capability for a quick buck.

Despite their name, most rare earths are not particularly rare. But most of the industry has moved to mainland China over the last two decades because of lower costs and steeply rising demand there as clean energy industries have expanded rapidly.

Congress is considering legislation to provide loan guarantees for the re-establishment of rare earth mining and manufacturing in the United States. But new mines are likely to take three to five years to reach full production, according to industry executives, although existing uranium mines may be able to move faster by reprocessing previously mined material, which often contains rare earths.

Synthetic replacements for rare earth elements are a nice thought, but apparently we aren't there yet. Someday, we will have to figure it out, but until then - this is a glaring example of why we must keep manufacturing in this country. We give it all away, we are at the mercy of those who make the guided missiles. You would think that real conservatives would be throwing a fit about this.

Selling out our national defense for cheap toys at WalMart is not in America's best interests. It's about time people realized that, if it's not too late already.