Rare earth metals are crucial in the in the creation of a “big variety of electronic technologies including lithium car batteries, solar panels, wind turbines, flat-screen television, compact fluorescent light bulbs, petroleum-to-gasoline catalytic cracking, and military defense components such as missile guidance systems”. China currently produces more than 95% of all rare earth metals in existence, and they control the ability to process them. This means that China has nearly total control on exporting the metals and attracting manufacturers to operate within China. With their control on exports, they can basically ration the metals to maximize profits and promote the labor force in China because manufacturers are forced to come to China.
The United States, Japan, and the European Union are requesting the World Trade Organization “to rule on China’s exporting policies”. A key issue concerning the exporting policies is that the price is expected to raise two to ten times the price of the Chinese domestic prices, because of the export tax. This is a huge concern for the United States, Japan, and the European Union is that this causes the manufacturing of rare earth metals becomes much more expensive for all companies operating in these countries. China’s monopoly on the production of rare earth metals is also causing them to become a monopoly in housing manufacturers that use them. China is claiming that their export tax and policies are based on “environmental and sustainability policies” and that they have no intention to disrupt the market. But, this reasoning is very hard to prove, as even China has not been able to explain the connection between the two. China says that new illegal mines came up and caused major environmental damage, and did not account for the damage in their pricing because of this the government feels that it must tighten control over the industry. However all these claims made by China do not prove how the export tax will benefit China’s environment. It seems as if they do in fact want to disrupt the market, because in addition to having an export tax, they are reducing the amount exported. Beijing in 2010 reduced exports by 9% as compared to 2009, and plans to reduce them by another 35% in the near future. When China joined the World Trade Organization, it signed an agreement, which limited the number of export duties, and taxes they could issue; this agreement however excluded rare earths to be taxed on export.  This is why the United States, Japan, and the European Union are outraged; China is reaping all the benefits of being in the World Trade Organization, but ignoring the agreements in order to give themselves the upper hand in the world economy. This is making all Chinese products in the market cheaper than their competition, causing customers to migrate toward Chinese products. Also those companies outside of China are feeling