Now raising intellectual capital
China might have good environmental reasons to restrict the production of rare earth metals, but export quotas and duties are not the way to do it.
Instead, it should raise environmental standards which will force consolidation in the production of these metals, which are key to green technologies. That will improve China’s environment, give it greater control over output, but reduce the risk of a trade battle.
China dominates the global production of rare earth metals — a collection of 17 chemical elements in the periodic table that are key materials for making hybrid cars, wind turbines and smart phones. This is unusual, as China depends on imports from abroad for most of its raw materials. However, the country’s control of supply has not helped it control prices.
Although demand has been rising more than 10 percent each year, prices were a third lower in 2005 than in 1990, mainly because of a surge of exports. Meanwhile, China’s reserves are being used up rapidly. They now account for only half of the world’s total, down from almost 90 percent in 1990.