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by Julie Klinger
China’s new government leadership appears likely to continue enforcing production and export controls on the country’s rare earth industry. Currently the producer of 95 percent of the world’s rare earth elements (REEs), China has been under fire since 2009 to lift its export quotas on these strategic elements essential to the manufacture of everything from iPhones to missiles. Since China restricted exports in 2009, prices for some elements have increased as much as 80-fold.
The WTO ruled twice in China’s favor against charges brought by the U.S., Japan, and the EU that China’s quotas unfairly disadvantaged foreign businesses. China claims that it simply cannot keep up with global demand without exhausting its own resources at a high environmental cost. China’s actions are permitted under Article XX of the General Agreement on Tariffs and Trade, which allows WTO member countries to enact trade restrictions in order to conserve exhaustible natural resources, so long as they are imposed equally on foreign and domestic firms.
This is exactly what Beijing has taken pains to do. Citing environmental and safety concerns, China’s central government has undertaken a three-pronged approach: reducing production quotas to levels that ensure long-term sustainability; closing down illegal mines; and forcing privately held companies to merge into larger, state-owned enterprises. These actions are calculated to facilitate greater oversight of China’s domestic mining industry in hopes of curbing environmental damage as well as removing China from the unenviable position of having the most mining-related deaths in the world. While this move hurts certain businesses and raises prices, it addresses some of the leading causes of China’s social unrest.
The effects of this strategy have been acutely felt by renewable energy, consumer electronic, and defense industries worldwide. The high prices have also opened up new horizons of mining possibilities, such as the northern Brazilian Amazon, where reserves have been known about for decades but were, until recently, considered too remote and too ecologically sensitive to extract. Not anymore: Brazil’s Rousseff administration recently declared the goal of making the country self-sufficient in REEs — and eventually controlling a third of the global supply.
While a greater supply would bring welcome price relief to industries around the world, it comes at a cost. Brazil’s REEs — like China’s — are located in ecologically sensitive regions, some of which are populated by indigenous peoples. As China takes steps to reign in environmental degradation and mining fatalities in this strategic sector, it displaces the problem elsewhere, to places willing to look the other way while new mining concessions flout national labor and environmental protection laws.
But within this problem lies tremendous potential for international collaboration around sustainable REE production, which should include expanding specialized recycling facilities to recapture these important elements. The greatest untapped reserve may not lie beneath the forests and deserts of the world but instead in our mine tailings and electronic waste. REEs have long been a waste product in iron, silver, and phosphate mines. Before prices went through the roof, it wasn’t economically feasible to filter through mine tailings for these precious resources. The game has changed.
Expanding recycling facilities and filtering for REEs in existing mine tailings will reduce the demand for China’s REEs and help bring prices down. If we can afford to buy these elements from the Mongolian steppe and the high Amazon, surely we can afford to invest in advanced recycling facilities a little closer to home.
Julie Klinger is a Ph.D. candidate in the Department of Geography at UC Berkeley and a National Science Foundation Graduate Research Fellow. She studies the global rare earth industry, focusing on China and Brazil and the relations between the two.