The joint complaint by the United States, European Union (EU), and Japan filed against the People's Republic of China (PRC) before the World Trade Organization (WTO) for its restrictive rare earth export policies marks another satisfying act in President Barack Obama's contain-China political theater. It also provides some insight into where the world is headed, and Japan's attempts to maintain its economic and geopolitical relevance.
The handwriting is on the wall for the PRC to lose the rare earth case. It is a virtual carbon copy of the raw materials export restrictions case brought by the US, EU, and Mexico against the PRC. Beijing lost, both in the original adjudication and on appeal in January 2012. [1]
In the raw materials case, the WTO found that China's regime of export duties and quotas for bauxite and other materials created a two-tier system that favored domestically based traders and processors (including FDI entities), and discriminated against foreign purchasers. It rejected the PRC's defense that these measures were protected under GATT provisions permitting restrictions on exports for the purpose of conserving scarce resources and preventing environmental degradation, observing that price and quantity controls that primarily targeted foreign purchasers was not a plausible implementation of a conservation policy.
At the time, it was widely believed that a rare earth complaint would be next, and indeed the shoe dropped in high-profile remarks by Obama in the White House Rose Garden on March 13.
China-bashing makes for good politics in this election season, and his administration and the media did their best to paint the case as a victory for freedom and fair play against the Chinese menace, citing China's monopolistic 97% share of current rare earth production.
