We like to present alternative points of view (as some of you will attest to). So when I saw this article on how China views America’s latest round of steel anti-dumping cases as well as the recent WTO filing, supported by the Obama administration attacking China’s export restrictions on rare earth metals, I thought, gee here is something we never read about in the mainstream press. We’ll summarize here the main points the Chinese make against US actions.
First, the Chinese claim the US deploys a double standard that actually goes against WTO rules. According to the Chinese view of comparative advantage (and this is according to just the one article linked to above mind you), developing nations like China will provide the developed countries with labor-intensive products in return for their hi-tech products and sophisticated technology with the aim to realize mutual benefit and conclude a basically fair deal. The double standard involves both the US and Europe placing export restrictions on high tech products.
The second element of the double standard relates to the US and EU putting barriers on the primary products or lower value products (e.g. steel products) in which China does have a comparative advantage aka anti-dumping cases. The Chinese claim that the WTO calls for discarding backward industries and expanding free trade. And according to our sources in China, these [anti-dumping cases] have been a disaster to the exporters in China.Ã‚Â Volumes have dropped by 50% or more for most of the exporters, and any added duty will make the case worse.
As for the specific argument against the rare earth metal export bans put in place by China in which the US has recently filed a WTO case (see our earlier post here on that development) China makes the argument that every government sets export curbs for non-renewable natural resources. After all aren’t China’s practices regarding rare earths the same as what OPEC does for oil producers? In short, the Chinese claim that the US practices selective free trade and that practice actually violates WTO rules.
Finally, according to the Chinese, even if WTO rules ban so called import/export barriers, exceptions still exist particularly around the environment and national security. By putting limits on the exports of rare earth metals (which the Chinese claim have been previously exploited), this strategy makes sense in terms of easing environmental concerns and moving China along its industrialization path. China has, however, modified export tax policies on many of these raw materials as we reported previously.
It’s probably fair to say that the Chinese make some compelling arguments.
America is not exactly known for its consistency and steadfastness with regard to trade policy. Our takeaway – the US must make it a strategic priority to develop alternative sources of supply for some of these critical raw materials, rare earths and non-ferrous metals. It’s hard to see how we could ever get all segments of these markets to agree on one trade policy – our domestic steel makers, Chinese steelmakers, photovoltaic and CIGS producers, lithium battery producers, rare earth mining firms etc.
In the words of Ben Franklin, we must, indeed, all hang together or, most assuredly, we shall all hang separately.
Editor’s Note: MetalMiner will be co-chairing a conference this fall on the subject of critical metals and risk management strategies to address these very issues. If you would like more information about this conference, drop us a line at lreisman(at)aptiumglobal(dot) com