China Wants Concessions for Mercantilism in Return for Rare Earth
Posted: 25 Nov 2010 09:17 PM PSTA story in Reuters signals that China is willing to soften its stance on rare earths. But of course, it has no reason to offer such a concession for free. The article indicates that China wants its trade partners to back off on their pressure on China to curb its abuses of international trade rules.
One of the problems with our international trade arrangements is that trade agreement participants tolerated a certain level of cheating. No one minded much when everyone seemed to be benefitting overall when global growth rates were good. Now with expansion more sluggish, the eurozone under stress, and the US mired in high unemployment, many nations are feeling less charitable towards practices that are not kosher under various international agreements. The problem is that having tacitly approved of these actions in the past makes it hard to secure changes in behavior.
China has come under pressure for its refusal to budge on some of its questionable practices, such as maintaining a currency peg at an artificially low level relative to that of many of its major trade partners. China’s latest trial balloon is that it want to trade some free passes on this front for easier access to so called rare earths, on which is has a stranglehold. Per Reuters:
China may be willing to soften the impact of its cuts in exports of rare earth elements on firms around the world that depend on them to make high-tech and defense products…a Chinese diplomat indicated China could be open to discussions on the issue.I’d like to know whether heads have rolled at any defense ministries over the rare earths issue. It’s one thing for businesses to be short-sighted, but sourcing of critical materials for weapons, and now systems, manufacture has long been a concern of military planners. Yet we’ve heard nary a peep of recrimination over this major blunder. I wonder why.
“We are open to an amicable solution,” the Brussels-based diplomat told Reuters, speaking on condition of anonymity.
“We are happy to continue a sustainable supply.”
A European diplomat also said there were early indications China was willing to soften its approach on rare earth export quotas…
But China has indicated it will not ignore European Union moves to penalize China’s state subsidies and cheap loans to manufacturers.
EU trade policy plans unveiled in October threatened harsh action against illegal Chinese trade practices, and scrutiny of subsidies which EU firms say give their Chinese rivals an illegal competitive advantage.
“We should be very careful and try and avoid large-scale trade frictions,” the Chinese diplomat said. “Subsidies are a very contentious issue.”