Chinese rare earth quotas officially dispelled

Chinese Ministry of Commerce recently issued the "2015 list of goods export license management," clearly the export of rare earth export license management execution, only to get export business export license contract, without providing approval. This means that the implementation of the 16 years of the rare earth quota officially canceled.

The most immediate cause of this change, or China lost in the WTO (WTO) in the lawsuit.

China is the largest producer of rare earth, accounting for 90 percent of global supply. Although rare earths is an important component of the defense industry and the department of modern technology, for the military, computers, mobile phones, wind power equipment, batteries and other technology products are necessary, even though China has a natural "monopoly" advantage, but unfortunately, the advantages of the product to sell to the price of cabbage, and disorderly exploitation of serious damage to the environment.

To reduce resource depletion, since 1998, the implementation of a rare earth export quota license system, the rare earth materials included in the processing trade ban catalog, and in 2010 a large-scale reduction of rare earth exports. International RE prices soared along.

It also led to an international uproar of "rare earth war." Expression of the United States, Europe, Japan and other countries strong dissatisfaction that China's rare earth export control, the Chinese enterprises have a clear competitive advantage in hybrid car batteries, wind power settings and energy-efficient lighting equipment and other products.

Dispute eventually evolve into a lawsuit, the US, Europe and Japan jointly to the WTO against China rare earths, tungsten, molybdenum related products export management measures violate WTO rules. After several rounds of the fight, in August 2014, WTO final ruling, rare earth export management measures implemented in China does not comply with the relevant WTO rules and China's WTO commitments, China dismissed the appeal.

As a result, China must change related rare earth export management. Commerce Department said in a statement at the time, said: "China will carefully evaluate the WTO ruling, to comply with WTO rules and ways to strengthen the management of resources, products, and promote resource conservation, maintain fair competition, to achieve sustainable development."

Cancel started from 1998 rare earth export quota system, also in the market expected. Next, China will cancel the 25% -30% export tariff, this change is expected to be implemented in 2015 later.

From this case can be seen, although China since that system of quotas and restrictions on sale intended to protect the environment, but actually this rough management style, in violation of WTO rules, and therefore difficult to prevail on international litigation. This is the Western countries to initiate proceedings against China on many occasions and winning the main trade rules.

Of course, the "rare earth war" is not completely finished, but also China's move to retreat intentions. After all, the quota system in the early years of the larger impact on exports in recent years has been in name only, because many simply do not run out of quota. Data show that the rare earth export quota for the last three years are slightly higher than 30,000 tons, but in 2012 the actual exports less than 20,000 tons, in 2013 and 2014 can not exceed 300 million tons.

But, if the mere removal of rare earths export controls, a corollary to bring the rare earth export market turmoil, including Chinese exporters increased, lower prices may again rise behavior, the final result is the environment suffer, undervalued resource, foreign manufacturers benefit.

Therefore, while complying with WTO rulings revoke the relevant export controls, China must improve the rare earth and other resource management system products.

First, you must comply with the rules of the market and international trade rules, do not have to make hard and fast rules on exports to avoid giving others a handle and trigger a new lawsuit is likely to lose. Frankly, at the time of the management system has not been serious sober legal assessment, of course, for China to win a certain amount of time, but the overall effect is poor.

Secondly, to strengthen domestic regulation. RE market has been chaotic, disorderly exploitation of many manufacturers, serious damage to the environment, smuggling is repeated. According to incomplete statistics, in 2011 overseas Chinese customs statistics are rare import export statistics 1.2 times, that is 120% of the normal amount of smuggled exports, the government can increase the threshold for mining companies, mining of rare earth resources integration, including the promotion of rare earths corporate mergers and acquisitions, while cracking down on smuggling and violations of the environment.

Once again, change the export tax as a resource tax. Export taxes for immediate action to restrict exports, but can easily be criticized. The elimination of export taxes, the result is lower export prices, but it is to create the conditions to improve resource tax, the state still seize the initiative on the export of rare earth, rare earth due to the price of cabbage that does not make a great resource cheaper foreign manufacturers.

Of course, the domestic manufacturers in terms of the use of rare earth, rare earth and outside the price approximately equal to improve their use of rare earth costs, thereby reducing the competitive advantage. But the market is equal to follow the competition, Chinese manufacturers can not always rely on the bottle, can be innovation by tapping the potential to create new competitive advantages.


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