BERLIN — The United States and Europe should work together with industry to reduce dependence on China for crucial minerals because global trade bodies are ill-equipped to solve the problem of withheld supplies, officials and executives said last week at a high-level conference.
Germany has been the most vocal country in Europe in raising concerns about the potential economic effect of shortfalls of rare earth and other metals, and its economy minister was a featured speaker at the conference, organized by the Federation of German Industries.
The consensus among attendees, which included representatives from industry as well as the European Union, the World Trade Organization and the World Bank, was that trade rules were inadequate when it came to respondingto China’s decision to cut back export quotas of such materials. China dominates the mining of these metals, which are crucial for hightech industries.
“The fact is that the existing rules do not appear to be commensurate to the problem we face,” said Frank Hoffmeister, deputy chief of cabinet for the European trade commissioner, Karel De Gucht.
Pascal Lamy, general secretary of the WTO, said his organization had no authority to deal with raw materials as such.
The term rare earths applies to a wide group of materials, some of which aren’t actually rare but are simply not being mined in many places. Examples of rare earths include neodymium,an element used in magnets, and lanthanum oxide, a compound used in hybrid car batteries and optical devices.
Many broadly written international trade rules canbe construed as applying to raw materials. The United States, the European Union and Mexico filed a WTO case against China last year asserting that it had violated a ban on export restrictions by limiting exports of bauxite and a half-dozen other industrial minerals; an initial WTO decision is expected next April.
An American executive at the conference suggested that the United States and Europe work together.
“It is up to us to solve the problem,” said Gary Litman, the U.S. Chamber of Commerce’s vice president for Europe and Eurasia. “The U.S. has the resources and together with our EU partners we can produce anything wewant.”
German companies complained that the lack of rules gave China free rein to do what it liked with its rare earth minerals. At the same time, flush with cash, Chinafaces few constraints in access to other raw materials to feed its expanding economy.
The case of iron ore was cited by Edwin Eichler, chief executive of ThyssenKrupp Steel Europe, one of the Continent’s biggest steel producers.
“Iron ore prices today have risen 100 percent compared to last April. Why? The 50-year-old benchmark that fixed prices for one year at a time has now been changed to a quarterly basis based on the Chinese index,” Eichler said. “So we face higher prices and reduced availability.”
Other industry chiefs echoed complaints that China was hinting that if industries wanted access to its rare earth minerals, then they should invest in China.
“Rare earth exports from China could fall even further, even by 30 percent next year,” said Ulrich Grillo, the chief executive of Grillo-Werke, a chemicals company. “So whatthe Chinese are telling us, directly or indirectly, is that if we want access to their rare earth material metals we should invest in China.”
He added that Western companies like his were reluctant to do so for fear that they would lose control of their intellectual property rights.
“China needs our knowhow and machines, but we need protection for our technology,” he said. “We don’t want these problems to turn into China-bashing.”
The German government has asked France, which takes over the Group of 20 presidency next month, to put raw materials at the top of its agenda. The economics minister, Rainer Bruderle, said he had received assurancesfrom Christine Lagarde, the French finance minister, that that would happen.
Information for this article was contributed by Keith Bradsher of The New York Times.
Business, Pages 76 on 10/31/2010