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What China should do on rare earth minerals?

Comments on Nabeel A Mancheri “China’s export restrictions on rare earths”, 6/10/2011, http://www.eastasiaforum.org/2011/10/06/china-s-export-restrictions-on-rare-earths/

While there are complaints of China's export restrictions on rare earth minerals, most do not show the impact on prices of those minerals. It would be useful to include price information in such discussions.

I am not familiar with the situation of rare earth mineral deposits, production and supplies in both China and in the world. I think if China produces 97% of world supplies, a fair rule for China to play should be index the prices of rare earth minerals with other international minerals and metal prices and imposes some sort of royalties based on such indexation.

Australia is an introducing mineral resources rent tax on some minerals, following the failure of an earlier attempt by the Rudd government to introduce a mining super profit tax.

Arguably, there are some differences between China and Australia in terms of the ownership of minerals (more broadly the land). Private ownership of land is not as significant in China as in Australia. The Chinese government arguably has stronger legal authority to impose a mineral rent tax based on the ownership status.

Once the mineral rent issue is resolved, China should not impose export quotas, so both Chinese and non-Chinese customers of rare earth will face the same price.

Of course, China can take additional measures based on environmental concerns, but that should be done on the non-discriminatory basis, that is, not targeting trade.

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