A worker waters the site of a rare earth metals mine in the Jiangxi province of China. |
By JOSH GERSTEIN | 1/19/11 7:45 PM EST
As President Barack Obama and Chinese President Hu Jintao sat down as part of Hu’s state visit this week, the Obama Administration pounded away on an economic message of “jobs, jobs, jobs.”
But some analysts say American economic officials’ intense focus on creating U.S. jobs by altering China’s currency-exchange policy is obscuring another Chinese effort that could pose a long-term threat to the American economy and even U.S. national security: a concerted campaign China has embarked on to secure stocks of natural resources around the world, including rare earth metals critical for sophisticated electronics and cutting-edge green technologies.
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“This is a real concern … This is an area that I think needs to be raised with the Chinese president,” said former Rep. Bart Gordon (D-Tenn.).
“It’s understandable that [currency valuation] would get the biggest play, but it shouldn’t justify ignoring this issue…. Clearly, the Chinese have a strategy of what you might call inventorying their needs for commodities and strategic materials for the future, understandably, because they have a fast-growing economy and you can appreciate their wanting to protect their access there.”
“American policymakers need to look at the way the Chinese do this and see if there is anything we can do about the centralization of natural resources into Chinese ownership and control,” said Jack Lifton of Illinois-based Technology Metals Research. “The Chinese have had a free hand to acquire resources around the world to augment their domestic resources to the point now where they have access to, perhaps, a more diverse resource base than we do.”
Interest in the issue has been simmering in some quarters, particularly since 2009 when Australia cited national security grounds in refusing a Chinese bid for a mining company there. However, Chinese firms — many of them state-owned — have continued to snap up mining and drilling interests around the globe, particularly in Africa. Some of the mines produce metals particularly important for the high-powered magnets used in wind turbines.
“Each of them is critical to a lot of the clean tech businesses, or strategic weapons, or telecom materials. And they [the Chinese] have sharply reduced their output,” Gordon said.
According to some reports, 97 percent of industrially mined rare earth metals are now under Chinese control. In addition, China raised eyebrows late last year when it limited exports of the raw materials. A specific restriction that seemed to be aimed at Japan due to a political dispute drew additional ire.
“The [European Union] is very concerned about this. The Japanese are catatonic about it, and we certainly should be concerned, too,” Gordon said.
White House officials said they did not expect the rare-earths issue to be raised at the presidential level this week, but they said it has come up in talks between the U.S. and China. In particular, the U.S. has argued that China’s limits on rare earth exports violate World Trade Organization agreements.
“We have been engaged with them on rare earths,” a senior U.S. official said Wednesday morning. “We’ve had consultations in Geneva around the WTO on the subject.”
“We think the rare earth issue is a very important one, and what we have communicated to the Chinese very directly is that we expect them to live up to their WTO obligations including their WTO obligations with regard to export restraints,” Deputy U.S. Trade Representative Michael Punke said last week.
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