Tag Archives: China

Security of Supply of Rare Earths: a Wake-Up Call

The Chinese government has blocked exports to Japan of rare earth minerals used in products like hybrid cars, wind turbines and guided missiles. The ban was introduced following a dispute on the detention of a Chinese fishing trawler captain by Japan. Japan has been the main buyer of Chinese rare earths for many years, using them for a wide range of industrial purposes.

This is the first time that China is ultimately using the dependency of a trade partner on rare earths to wield political pressure in an international dispute. It’s unprecedented and probably illegal under WTO rules.

However, there are no guarantees that such measures will not be imposed in the future on the European Union, too. In fact a report of a special ad-hoc working group has listed rare earths as some of the truly critical raw materials for the EU.

The recent imposition of the ban by China raises important questions about the future supply of rare earths and other rare raw materials to the EU. The EU should continue its engagement with the WTO on this issue. China should be decisively discouraged from using such policy measures in the future.

UPDATE: China has denied reports it banned the export of rare earths to Japan. More information on this will probably follow in the next few days.

Is Germany to Blame for the Crisis of the Eurozone?

I’ve heard this many times before, and it has come from all sorts of directions. But now two people that I respect – Martin Wolf and Peter Zeihan both say that Germany has in fact a lot to do with the current financial crisis of the eurozone.

Martin Wolf talks about the strategy of “Chermany” – that is, China and Germany, to encourage deflation in countries with trade deficit during the current economic crisis. Mr. Wolf criticizes the proposals of the German finance minister Wolfgang Schaüble that include combining emergency aid for countries running excessive fiscal deficits with fierce penalties; suspending voting rights of badly behaving members within the eurogroup; and allowing a member to exit the monetary union. Mr. Wolf believes this will weaken the entire eurozone economy because of the necessary deflation in trade deficit countries. He also says that trade surplus countries (and Germany in particular) refuse to accept that their reliance on export surpluses must rebound upon their internal markets.

Peter Zeihan goes much further. He bluntly says that the Germans crafted the euro to rewire the European Union for their own purposes. He points out that European states are borrowing money (mostly from Germany) in order to purchase imported goods (mostly from Germany) because their own workers cannot compete on price (mostly because of Germany). Mr. Zeihan concludes that the European Union is becoming a kind of a Mitteleuropa.

I am not an economist and therefore I cannot evaluate in substance the arguments of the authors. I am worried, however, about the repercussions of such a line of thought.

China Brings EU to WTO over Shoes

China has complained to the World Trade Organization about anti-dumping duties imposed by the European Union on shoes made in China.

China says that the EU has “violated various obligations under the W.T.O., and consequently caused damage to the legitimate rights and interests of Chinese exporters.”

Interestingly, the European Footwear Alliance agrees with China and says that that “ironically the measure hurts European business and consumers the most”.

Negotiations with Iran – E3+3 or P5+1 or?

Joshua Keating talks about the name of the negotiations format that includes the United States, France, Britain, China, Russia, and Germany. One way to call it has been P5+1 (permanent members of the UN Security Council + Germany). Another way is to count E3+3 (three European countries plus the others).

Keating doesn’t like the new acronym, but he apparently misses a point here. The thing is, Mr. Javier Solana (High Representative for the Common Foreign and Security Policy of the European Union) will also attend. And, oh, he did arrange the meeting itself.

So it might not be that bad to put an emphasis on Europe, this time.

Trouble over Raw Materials Supply from China

The association of German industry BDI has warned that:

“Global, European and national restrictions to commodities are threatening the growth of German industry, which is vital to overcoming the current crisis.”

“We are steering towards a raw materials gap,” said Ulrich Grillo, chairman of the BDI commodities group and chief executive of German zinc producer Grillo-Werke.

BDI complains that China alone has restricted trade with raw materials and semi-finished products with some 373 export duties.

This complaint comes when there’s news about a draft report by China’s Ministry of Industry and Information Technology. The report has called for a total ban on foreign shipments of some rare metals, while introducing export quotas for other rare elements far bellow global needs.

EU, US Take China to WTO over Raw Materials

Both the European Union and the US have requested consultations with China in WTO over export restrictions for raw materials.

According to Catherine Ashton, EU Trade Commissioner: “the Chinese restrictions on raw materials distort competition and increase global prices, making things even more difficult for our companies in this economic downturn. I hope that we can find an amicable solution to this issue through the consultation process.”

Raw materials in question include yellow phosphorous, bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide and zinc.

China says that the restrictions are meant to protect the environment and comply with Chinese trade commitments.

To put this in perspective, read the excellent article by Martin Stürmer: “The International Raw Materials Boom. A Challenge for Multilateral Trade Policy”. The author pays specific attention to the implications of raw materials competition, which caused many wars in the last two centuries, and prompted the beginning of the European integration process. Stürmer thinks that the multilateral world trade system is barely adequate to meet the new challenges arising from increasing raw materials consumption. The author advocates for a recognition of the development policy interests of many producer states.

Should EU Member States’ Embassies Help Iranian Protestors?

EUobserver reports that Italy had instructed its embassy in Tehran to provide humanitarian aid to wounded protesters, pending a coordinated response from all EU countries. Austria has also instructed its embassy to provide first aid to protestors. But Sweden – which is about to take over the EU presidency – said it cannot grant asylum to refugees. Belgium also thinks that it should not allow refugees on the territory of its embassy.

France and Finland have also called for a common EU approach on how to deal with refugees and asylum seekers.

In the same time the Iranian government has accused the UK and France in meddling with the crisis.

What should EU governments do? From a diplomatic and consular law perspective – nothing. They should not use embassies in such a way that can infringe article 41, of the Vienna Convention on Diplomatic Relations – containing a duty a duty not to interfere in the internal affairs of the receiving state.

However, the EU can do a lot by working with the US, China, Russia, and other stakeholders to contain Iran, as claims François Godement from the European Council on Foreign Relations. A team of experts from RAND Corporation also believes that a concerted, multilateral approach is needed to manage the Iranian threat. This also implies a common European approach to Iran for a change.