Schumer Has Pushed for the Administration to Investigate China’s Restraints on Exports of Critical Minerals And Increases in Export Taxes In Possible Violation Of International Law

U.S. Trade Representative’s Challenge of China’s Rare Earth Export Restraints Will Address Practices That are Driving Up Production Costs for Companies, But Schumer Urges More Immediate Actions To Protect Companies Like Ceno Technologies in Buffalo & Others Across the State

Schumer: Feds Should Block Chinese Mining Projects Until China Plays By The Rules


Today, U.S. Senator Charles E. Schumer announced that U.S. Trade Representative Ron Kirk plans to challenge China’s unfair trade practices involving the exports of rare earth elements. Specifically, USTR has requested consultations with the People’s Republic of China at the World Trade Organization (WTO) concerning China’s unfair export restraints on rare earths and other materials that are critical to high-tech and manufacturing businesses like Ceno Technologies in Buffalo. The Chinese government's actions have created yet another unfair advantage for Chinese manufacturers, causing markedly higher cost increases for high-tech and manufacturing companies in New York that produce items ranging from batteries to wind turbines, and from laser-guided weapons to night vision goggles. In January 2011, Schumer stood at the Innovation Center in Buffalo, the future home of Ceno Technologies which relies heavily on rare earth elements for its technology development, as he urged the Administration to take action against China’s unfair practices.


Of all rare earth elements that are industrially mined, 97% are controlled by China. The Chinese government continues to impose strict export restraints and sky-high export taxes on rare earth elements. This has meant a cheap and plentiful flow of rare earth elements within China, and an expensive and drastically limited global supply. U.S. Trade Representative’s request for consultations announced today is the first step in the WTO dispute settlement process, and parties are encouraged to agree to a solution at this stage.  Under WTO rules, if the matter is not resolved through consultations within 60 days, the United States may request the establishment of a WTO dispute settlement panel. Schumer today said that this is an important first step, but more must be done to combat China’s hoarding of rare earth metals. He is urging the Treasury Secretary to block financing for Chinese mining projects and the Interior Secretary to block future mining projects in the United States.


"From currency manipulation to hoarding rare earth minerals, the Chinese government has time and time again violated international treaties and trade agreements to boost their economy at the expense of others," said Schumer. “The U.S. Trade Representative’s announcement today to challenge China’s restraint on exports of rare earth elements at the World Trade Organization marks an important step towards putting a stop to China’s illegal hoarding practices that are threatening New York’s high-tech and manufacturing businesses in Buffalo and throughout the state. But we have to do more, which is why I’m urging the administration to block international bank financing of Chinese mining projects, as well as new Chinese mining projects in the U.S., until China agrees to play by the rules. I will continue to push the Administration to move this case across the finish line.”


Ceno Technologies researches and develops advanced materials technology that relies heavily on research utilizing rare earth elements. The Buffalo based company used to pay $200 per kg of Gadolinium and now pays $600 per kg. This is three times the price for an essential ingredient to Ceno’s production process. The trade restrictions by China, have led to higher production costs for items like batteries, magnets, electric cars, and wind turbines. Rare earth elements are also critical to military weapons systems, laser-guided weapons, and night vision goggles, leading these restrictions to pose a serious threat to national security.


For years, the Chinese government has slowly tightened rare earth element export quotas, but has recently taken these unfair trade practices to the next level, with a 72% reduction in the export quota level for the second half of 2010. The Chinese government continues to impose cuts in the quota limit, causing massive distortions in the global market and disrupting the global supply chain. According to a GAO report, the Chinese government has also increased export taxes on rare earth elements by 15% to 25%. The combination of strict export restraints combined with skyrocketing taxes on the limited rare minerals that are exported has resulted in a cheap and steady flow of rare earth elements to Chinese manufacturers, and a scarce and expensive supply to the rest of the world.  


The drastic changes in Chinese export policy have caused serious uncertainty among producers who use rare earth elements in their products. Previously, prices for these metals would have changed every month or two, whereas some producers are now being notified daily that prices have changed or that the minerals they need will be unavailable for a given amount of time. This seriously hampers their ability to plan for the future.


China’s trade practices also pose a threat to national security. According to the Department of Defense, difficulty in obtaining cerium has already caused production delays with weapons systems. Several branches of the military, a defense contractor, and departments across the federal government have begun to review their rare earth metals acquisition process, recognizing the possible perils of depending on a Chinese-dominated market full of unfair policies. Rare earth elements from China are essential to a wide range of commercial and military products including batteries, wind turbines, smart phones, hybrid cars, magnets, laser-guided bombs and munitions, and night-vision goggles. The reduction in export quotas has resulted in huge spikes in the cost of production for companies in Upstate New York that produce high precision lenses, magnets, and other products.

China’s restrictions on fair access to critical rare earth elements are intended to bolster the health of its domestic manufacturers, as well as China’s economy.  China’s restrictions also put pressure on U.S. and other foreign manufacturers to move to China in order to gain access to adequate supplies of needed rare earth elements.