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China Embargos Rare Earth Exports To Japan
Hugh Pickens writes "The NY Times reports that the Chinese government has placed a trade embargo on all exports to Japan of a crucial category of minerals used in products like hybrid cars, wind turbines and guided missiles. China mines 93 percent of the world's rare earth minerals, and more than 99 percent of the world's supply of some of the most prized rare earths, which sell for several hundred dollars a pound. The embargo comes after a dispute over Japan's detention of a Chinese fishing trawler captain whose ship collided with two Japanese coast guard vessels as he tried to fish in waters controlled by Japan but long claimed by China. The Chinese embargo is likely to have immediate repercussions in Washington. The House Committee on Science and Technology is scheduled to review a detailed bill to subsidize the revival of the American rare earths industry and the House Armed Services Committee is scheduled to review the American military dependence on Chinese rare earth elements."
"And then World War 3 was fought over dirt."
"Don't you mean land, Grandpa?"
"No, dirt. But it was extra special expensive dirt. I shot me a lot of Chinese just to get a wheelbarrow full. It paid for your fancy university education. And your radiation pills."
We should probably note here that the Wall Street Journal printed all kinds of denials from the Chinese. http://online.wsj.com/article/SB10001424052748704062804575509640345070222.html Me, I'm just annoyed that we can't get a real industrial policy together to support a rare earth metals industry in the US. Got annoyed enough to write a piece for The Atlantic about it: http://www.theatlantic.com/technology/archive/2010/09/worried-about-chinas-monopoly-on-rare-elements-restart-american-production/63444/ One thing to watch out for on the rare earth metal tip is that the Department of Defense is releasing a report on their use for military purposes in the beginning of October. Will be interesting to see what they say.
Ya we need to look in to this. Despite the name, Rare Earths aren't. There are plenty of them. Of course they have to be mined, refined, and all that shit. That is largely left to China simply because China pays people shit and has no safety or environmental standards. However as you accurately note, they are important, we need to be supplying ourselves.
The fisherman story is a big piece of this story, but not all or even half of it. The real issue at stake has to do with some little tiny rock in the East China Sea. It was recognized as an island and part of Japan's soveriegn land by treaties with the US in WW2, but historically has been used by both China and Japan. The fact is, it doesn't really qualify as an island by the international legal definition; it's just a dead volcano with no active life or anything. Just a big rock.
However, if the Japanese can claim it as their territorial grounds, then what comes along with that is the 200 mile exclusive economic zone, and apparently that area has some of the best commercial fishing in East Asia as well as being suspected of having substantial undiscovered mineral and gas deposits. So while the talk about a fisherman is noteworthy, he's just a pawn, like this rare earth metals embargo is also a pawn, in this game over access to exploit those resources.
... But not intentionally so... if you RTFA, and I did, you'll find that rare earths actually aren't really rare. So while China MINES 93 percent of the world's rare earths, and thus supplies 99% of it, most countries COULD also do this if they wanted to. In fact, the last mine in the US closed in 2002 because, according to the article, of a radiation leak... seems these rare earth's are usually found with radioactive thorium and uranium. So what has happened is that China positioned itself as a reliable supplier of rare earths, and did so cheaply. Although the article doesn't say this, my guess is that China probably doesn't take the same safety precautions with mines and the thorium, which the article did say was costly to dispose of.
What has happened here is that China, again, produces things in an environmentally unfriendly way (since they apparently don't care much about the cost of crapping on their own country), and thus does so with cheap labor, thus becoming the most economically viable producer. Only now do they start to flex that muscle they have built...
So the world has a few choices - they can continue to rely on China, and deal with politically induced supply disruptions, find other countries that are willing to cheaply crap on their own environments and buy from them, or produce such materials locally but at much higher cost.
Brawndo: It's what plants crave!
If you think this is really just about a fishing boat, you haven't studied enough history or global politics.
In terms of natural resources, Japan is practically void of anything valuable. Lucky for the Japanese, China is still pissed over that whole "Rape of Nanking" deal.
China is one of the oldest civilizations on Earth, and at one time had perhaps the most powerful. And yet, after their golden age, they withered and spent the rest of history being what we would call a Third World Country. Only now are they finally ready for world power status again.
Contrast them against Japan, who only a little more than a century ago, was a dirt poor, backwards country that had to be literally forced at the barrel of a gun to open their doors to the world. By the 1930's... scant decades away... they became one of the most powerful industrialized countries in the world, creating a war machine that conquered a huge part of the globe in just a few years.
And then we nuked them. They went from world power, to shambles, a conquered country with two radioactive wastes where cities had been. And in less than three decades after that, they became one of the wealthiest and most technologically advanced countries on the planet... again... arguably more powerful economically than they were at the hight of their military might.
They did all this... twice... in the span of a single century, with no natural resources to speak of, save one: the Japanese people themselves.
I wouldn't count Japan out just yet.
Life is hard, and the world is cruel
You're correct that rare earth elements aren't rare in the cosmic abundance sense. The original name came about because they were first isolated from a mineral only found in a particular mine in Ytterby, Sweden (hence the names of many of them: scandium (from scandanavia), yttrium, terbium, ytterbium, erbium).
The modern "rarity" issue comes in because they all have very similar chemical properties (mostly lanthanides, plus the rest of Group 3 (III-B oldstyle) of the periodic table). They tend to occur together, and because of the similar chemical properties, are difficult to separate. Not quite as difficult as, say, uranium isotopes, but not as trivial as separating lead or zinc from mixed sulfide ores.
-- Alastair
I assume what the original poster means by pseudo-capitalism is that there is state control over certain sectors of the economy, and intervention in others (often at the whim of party officials with greased palms). In particular, this means that China has systematically undervalued their currency by ~20-40% against the dollar. This has several effects, the most obvious being that it substantially increases the competitiveness of China's exports (and cost of imports). This benefits a specific group of well connected industries in China, which among others are the mining and dirty manufacturing industries that are depleting China's natural resources and exporting them as quickly as they can. The trade-off domestically however, is that it decreases the buying power of the average worker considerably and leads to inflation. It leads to inflation because to maintain the undervaluation, China's central bank has to intervene in the currency markets and buy dollars to prevent the Yuan from appreciating, which increases the domestic money supply. By having to buy dollars (ie: US treasuries) China is essentially stuck buying huge amounts of US debt as long as it wants to maintain the export edge from having an undervalued currency (which is causing huge domestic pressures within China, there have been quite a few labor riots and urban-rural tension in the past few years). This has two effects on the US: one is that it keeps interest rates low and our debt cheap, the other is that it makes our exports 20-40% more expensive, costing the US at least a million jobs (most estimates are about 1.2m) at present.
So China is stuck with a dilemma: they can't become a first world country until they let their currency float, because their average citizens have reduced buying power. But they can't let their currency float until they have an economy that is sufficiently robust that it doesn't require a 20-40% import tariff/export subsidy (which is what the currency manipulation is doing), which means developing a domestic market under conditions of high inflation (currently ~8%) and high interest rates (currently 5.3%). And they have to do it before resource pressure (particularly food, water and pollution) overcomes economic growth, while funding a large chunk of the US current account deficit in the mean time. If China doesn't manage that, then both the current government and the economy collapses, and China goes through another cycle of regionalism and stagnation (and if China does manage it, we're probably looking at a world war over scarce resources).
This is not a dispute over a fisherman. It is a territorial dispute over a very large chunk of water around a disputed island. It is also an opportunity for China to put pressure on Japan and indirectly on the US (which relies on Japanese to manufacture many critical industrial components, many military in nature that can no longer be manufactured in the US because the US is no longer economically competitive in many high-tech industrial technologies. China sees this as an opportunity to exert its growing economic influence at a time that the West is not economically or politically able to respond because it is bogged down in two land wars in Central Asia. They are sending a signal that they are now the dominant power in Asia and the rest of the world can expect them to be the dominant economy in the world in just 10-15 years time at current rates of growth. This will almost certainly happen sooner as the republicans who look as if they are about to come into power are determined to shrink the US government, which will almost certainly speed up the difference in infrastructure and military preparedness. If we get into it with Iran, expect the Chinese who rely heavily on Iranian oil to come into more direct conflict with the US, probably by igniting inflation in the US by pulling their underwriting of US debt instruments that are all that is propping up the US financial system presently.
If the China Japan situation escalates our treaty obligations will draw us into it. Its unclear how the US will fare being so dependent on middle eastern oil, which can be easily shut off at the Straits of Hormuz by the Iranians and its military highly dependent on satellites for its battlefield and tactical awareness. The strategic petroleum reserve won't last long in an all out draw down. To make matters worse, just a few well coordinated EMP generating blasts in space and the US military will be largely blind. No wonder DARPA is scrambling to counter the new maneuverable Chinese killer satellites with high altitude solar aircraft. My guess is the republicans will let Japan fall to the Chinese and go into a more conciliatory mode to keep the Chinese money needed for tax breaks for billionaires safe.