Rare-earth limits not aimed at foreign market
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What the Chinese government has been doing is to introduce law and order in this otherwise free-wheeling Wild West. China has tightened up environmental regulations to root out unscrupulous companies.
Export quotas have been put in place to protect those companies that stick to proper production standards.
The overall objective is to preserve natural resources and maintain healthy industry growth.
Against this background, I find it odd that Krugman would be on the Japanese side at the cost of US interests.
The rare-earth export situation is not so different from toys and textiles from China, in that the AFL-CIO would usually be the first to voice concerns about poor environment and workplace safety standards in China, making Chinese costs unjustifiably low while making US production uncompetitive and eliminating US jobs.
Nevertheless, according to Krugman, the issue is all about playing by the rules in international trade. As a specialist in this field, I'd like to make the WTO rules clear.
Article XI of the 1994 General Agreement on Tariffs and Trade (GATT) generally prohibits quantitative restrictions on the importation or the exportation of any product. However, the GATT also provides exceptions to this fundamental principle, one of which is critical for China's defense if its stance ever gets challenged at the WTO.
Export restrictions are allowed that are necessary to the application of standards or regulations for the classification, grading or marketing of commodities in international trade. China's effort to clean up the industry clearly represents one form of this.
Furthermore, GATT Article XX provides exceptions that are free from member countries' general WTO obligations.
Specifically, article XX(9) allows members to adopt measures relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.
All Beijing needs to do is to make these measures more effective.
The author is a faculty member of the Beijing-based University of International Business and Economics. johngong@gmail. com
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