The Great Debate UK
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
HONG KONG -- China may stub its toe on its rare earths quotas. By restricting exports of the metallic elements, it is hoping to give domestic industries a boost. But Chinese companies will lose if the move leads to trade restrictions or boycotts of overseas acquisitions. If Beijing is serious about addressing environmental concerns, it should cut rare earths production, not exports.
Rare earths, a group of 17 related elements, are used in electronic devices and clean energy technology. Though China controls just 36 percent of the world's rare earths reserves, it supplies 97 percent of global demand, according to the U.S. Geological Survey. Cutting export quotas will make sure that, in the short term, more production using rare earths will stay in China. Reopening mines takes time, and there is limited operational expertise outside China.
Though the move raises trade concerns, the World Trade Organisation can't twist China's arm. WTO Director-General Pascal Lamy has said that export restrictions on resources are very difficult to address under existing provisions. Securing access to resources wasn't a political priority when trade rules were set up 60 years ago.
from The Great Debate:
The U.S.-China tire dispute threatens to spill into other sectors and squeeze Chinese exporters' already razor-thin margins further. It might seem mind-boggling to many that Chinese manufacturers are still hanging on to weak overseas markets even though the domestic economy looks much healthier and surely offers more potential.
But there are structural reasons why the grass is greener outside China. The risk of not getting paid, or getting paid late, is significantly lower when dealing with foreign buyers. The cost of international shipping has dropped so much that it can be cheaper to send goods over the Pacific Ocean than across the country.
President Barack Obama's decision to impose safeguard tariffs on imported tyres from China has drawn predictable howls of outrage from economists, think tank staff and editorial writers -- none of whom has seen their job exported to China. It would be more constructive if they devoted the same effort to devising ways to compensate losers from globalisation in order to shore up waning public support for trade liberalisation.
Between 2000 and 2008, almost 4 million jobs were lost in U.S. manufacturing (22 percent of the total), many as the result of offshoring and increasing competition from lower-cost manufacturers in China and elsewhere in Asia.
Over the same period, the federal government provided just $1 billion per year in extended unemployment benefits and retraining under the Trade Adjustment Assistance (TAA) programme. In the fiscal year ending September 2008, TAA helped fewer than 100,000 workers who had lost jobs as a result of changing trade patterns.
The debate for or against a Latvian fixed exchange rate rages on. There are good pieces of analyses on both sides of the debate, there are less good ones, there are mediocre ones – and then there is Jonathan Ford’s “Latvia: let the lat go” from 29 July.