The complainants being USA, EU, Japan and Mexico. The Dispute Settlement Body of WTO agreed that China has violated its commitments towards accession to WTO and must take appropriate steps to facilitate unhindered exports so that finished products using these raw materials can be produced. Earlier, Indonesia had put an embargo on the export of iron ore without further processing to be implemented from 2014. But the Chinese restriction on the export of rare earths, which has around 90% of the world reserve, has taken a curious turn.
Studies have shown that rare earth elements are used in mature markets of catalysts, glass-making, lighting, defence equipment and metallurgy to the extent of around 60% and the balance 40% is used for high growth markets in battery alloys, ceramics, permanent magnets and smartphones.
Various elements such as Lanthanum, cerium, dysprosium are also used in various proportions. The issue that is currently being talked about is that rare earth elements, being in short supply outside China, need to be conserved for the sake of production of mature and high-growth markets that are of high technology and have environment application.
China is planning a significant increase in the production of electrically-operated vehicles, solar energy, energy-efficient lighting for which rare earth elements are major inputs. Further, many multinationals such as GE, Siemens have already set up industries in China that would require rare earths as their primary input. In the 18th Congress of Communist Party of China, the resource conservation has been adopted as a major goal. Meanwhile, the sharp drop in prices due to a demand shortfall and comparatively less attention on energy-efficient technology has resulted in a cut in the production of rare earths.
These latest happenings may draw a few implications for the conservation of raw materials. If the country possessing natural resources makes a plan for production of goods that would require input in the long run, how can we make judgment on the propriety of the country imposing restriction on the export of the item. The case of restriction on rare earth export by China against the backdrop of a WTO ruling supporting the contention of importing countries against Chinese violation of free trade has clearly made us realise that precious natural resources are to be preserved to facilitate production of high-end and energy-efficient technology products.
We are not sure at this stage if the WTO would exclude rare earth from its earlier ruling on restrictive trade in respect of other raw materials by China. But time is ripe for reconsideration. The insistence by Afghanistan, Bolivia, Mozambique, Guinea, Indonesia, Zimbabwe to process the raw materials (for instance chrome ore, platinum for use in domestic smelters in Zimbabwe) by beneficiation or by setting up downstream facilities to utilise the raw materials and thereby creating employment and income opportunities for the people of the country before allowing exports of the unprocessed raw materials substantiate the logic.
One wishes that Indian steel producers had set up beneficiation and pelletisation facilities a decade earlier as a part of a long-term vision and shaken off the complacency of self-sufficiency in iron ore that could have enabled the country to preserve more than a billion tonne of this precious item and allow the existing steel producers an uninterrupted supply mode without any need for the intervention by the court.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal