China refuses to export rare earth metals to Japan in a recent trade dispute. The Associated Press reports Japan’s imports of minerals needed to manufacture iPods and sensitive parts of automobiles have slowed considerably, according to Japanese officials speaking at the G-20 summit in Seoul, South Korea.
The trade embargo may stem from rising tensions between Japan and China regarding a naval incident in September. Two Japanese patrol boats collided with a Chinese fishing trawler near disputed islands in the East China Sea. Japan has recently vowed to move troops onto those islands, despite both China and Japan claiming them as their respective territories.
China’s Bold Move
China already controls 95 percent of the world’s global market of rare earth minerals. China can probably do what it wants regarding these rare earth minerals used for missile guidance and satellites. The Washington Post reports minerals such as lanthanum, europium and neodymium are found mostly in China, former Soviet republics and the United States.
Japan says it is looking for alternatives, but for now the outcome may send a ripple effect into other economies. Japan is a huge exporter of electronic devices in which these metals are used to manufacture. Big-ticket items may go up in price if the exporting war continues.
Japan may be able to find other sources of these metals, but doing so will take time. If a small mining outfit suddenly has a larger market to saturate, they may need more time to extract the metals. Contrarily, if the rest of the world does step up and cater to the needs of the world’s second-largest economy, then China may lose out in the rare metals market.
Large Economies at Stake
What is at stake are two specific sectors in two very large economies. What will happen is one of two things. First, the two sides will reconcile and trading will go back to normal. The possible second outcome will be Japan finds other sources of the minerals.
Should Japan find other sources, China may cry foul and strike back in other ways. This seemingly minor struggle between two economic powers may quickly digress into a larger struggle. How this pans out in the next few months will be telling as to how Japan and China handle themselves as two titans on the world economic stage.
This tug-of-war involving rare earth metals will prove how nimble both Chinese and Japanese trade negotiators are when it comes to finding other sources for the metals. Will these extremely large economies falter and productivity slow as a result? How quickly Japan can act upon the Chinese embargo will speak to how seriously the threat is taken by Japan.
Associated Press, “Japan says China still blocking rare earth exports”, AFP.
Bloomberg News, “China Denies Japan Rare-Earth Ban Amid Diplomatic Row”, Washington Post.