Export Restrictions on Natural Resources: Chinas Export Restraints on Rare Earths

Abstract

Export Restrictions on natural resources have recently become an increasing source of conflicts in the international trade. In particular, the rare earth has been a matter of great concern among the worlds strongest economic powers. Here, three methods to address the rare earth issue, diversification of production, development of technology for substituting rare earths and resolution through the WTO dispute settlement system, are reviewed and I chose to focus on resolution through the WTO dispute settlement system. The affected countries are exploiting all three methods simultaneously, not depending on only one method. Among three methods, diversification of production and development of technology are ways for the countries to promote independently without much need of consultations and understandings between countries. The resolution through the WTO dispute settlement, however, involves dynamics among the related countries, including all the political, economic and legal aspects. Thus, I believed that the method was worthy to analyze for the thesis of international studies, which included politics, economics and law in the course of studies to help foster a broad understanding of the events in the international arena. Bringing the issue before the WTO includes all the three aspects and China is thought to be pursuing policy objectives which are consistent with the WTO rules such as protection of the environment and preservation of exhaustible natural resources and inconsistent with the WTO rules such as having pricing power and benefiting downstream industries at the same time. China should avoid unfair practices of export restrictions and be aware that it would be harmful for China to pursue some policy objectives inconsistent with the WTO rules in the long term. The United States, the European Union and Japan, for their parts, should understand environmental concerns of China regarding rare earths and they are not entitled to force China to product rare earths at cheap prices forever.