Monday, February 9, 2026

China vs. Obama at the WTO 2016

Last update: Tuesday 2/10/26 8:51pm

Deng Xiaoping's image appears on this page because, as the 'father of modern China', he inspired his country to greatly enhance its power by leveraging its abundant rare earth resources.  In 1992 he famously declared, "The Middle East has its oil, China has rare earth: China’s rare earth deposits account for 80 percent of identified global reserves, you can compare the status of these reserves to
that of oil in the Middle East: it is of extremely important strategic significance; we must be sure to handle the rare earth issue properly and make the fullest use of our country’s advantage in rare earth resources." 

Op-Ed ➡ HERE


1. Introduction | 2. Training | 3. China vs Obama | 4. China vs Trump-1 |
 5. China vs Biden |  5. China vs Trump-2 | 6. Master Menu

1) Introduction
With these ambitious words Deng launched an inevitable conflict with the ambitions of another great power, the United States .The English translation of his words appears in the following report: 
This 2019 ASPI report provided an authoritative overview of the specific steps the Chines government took to implement Deng's visionary strategy; hence the next section will include bullets that contain verbatim quotes from this report. However the reader should always bear in mind  that China willingly paid a high price for its success in the form of toxic wastes, a price that other nations, including the United States, were unwilling to endure, as recounted by the following NY Times report.

  • "China Has Paid a High Price for Its Dominance in Rare Earths", Keith Bradsher, NY Times, 7/5/25
The previous Context installment of this report provided a low key introduction to heavy rare earth elements (HREEs), China's dominant position in their refinement, and their largest known reserves in Greenland. The first two sections of this installment continue in that vein.

But the final section will read more like a reporter's round-by-round notes about a heavy weight championship boxing match, a match that is still ongoing. China, inspired by Deng Xiaoping's vision, was the upstart challenger who had been quietly training for more than two decades to get into the best possible shape. Then it suddenly won round after round against the U.S., the hitherto unchallenged champion.


2) Training
Here are a few quotes from the ASPI report that describes China's extensive efforts to implement Deng's vision.
  • "China’s mercantilist approach to rare earths was reinforced by Deng’s successor Jiang Zemin ... who declared that China’s task was to ‘improve the development and application of rare earth, and change the resource advantage into economic superiority’"

  • "At least 40% of China’s output was ‘illegal’ production by small-scale entrepreneurs in the south of China who found they could extract rare-earth oxides from clay soils either with strip mining or by soaking trenches with sulphuric acid. Efforts to shut down these operations, which cause extensive environmental damage, have been only been partially successful, in a striking reminder that the power of the monolithic Chinese state diminishes with the distance from Beijing."

    -- Editor's note: These '    illegal' miners did not sell all of their ore to China's refineries; they smuggled the rest to overseas buyers.

  • "While building its own production, China has also sought to control the output of rivals. In 2005, the China National Offshore Oil Corporation [CNOOC] bid US$18.5 billion for the US oil business Unocal ... Unocal also owned the only rare-earths mine in the US, Mountain Pass (it was mothballed at the time). CNOOC’s bid raised a political storm in the US which ultimately led it to withdraw."

  • "In the mid-1990s, GM was going through a period of corporate restructure, shedding ‘non-core’ subsidiaries, and the magnet-making firm was sold to a joint venture of two Chinese state-owned firms for US$70 million. The sale was controversial—regulators demanded a commitment that the Chinese buyers would retain the assets of the business in the United States for at least five years ... In 2002, the day after the five-year commitment expired, the US manufacturing operations were closed and the entire plant was shifted to China. The US has only regained a fraction of its capacity to manufacture rare-earth magnets." 

  • "Chinese investors remain active in securing stakes in rare-earth prospects around the world, including in listed Australian rare-earths companies Arafura and Northern Minerals".

3) China's challenge and President Obama's WTO response
This section presents an unusual timeline of the most important events that occurred during the interactions between China and the Obama administration. 

It is unusual because it includes all of the events that the editor has selected with the benefits of perfect 20-20 hindsight. However, there is little reason to believe that the Obama administration was aware of  significance all of the actions taken by the Chinese leadership.

(a) China joins the World Trade Organization (WTO)   ... "China became the 143rd WTO Member on 11 December 2001. ", WTO, 12/11/2001

(b) China announces a five month crackdown on illegal rare earth mining starting in 20 June 2010 ... "Govt cracks whip on rare earth mining", China Daily, 5/21/10

Note: This announcement pressured smugglers to raise their prices immediately because each was not sure how long it could evade the government's crackdown. Indeed, the surge in prices that resulted from the "clampdown on illegal mining" was confirmed by The Guardian, 6/18/08

(c) China imposes an export tariff on rare earth exports ... "China to hike some rare earth export duties", Terra Daily, 12/14/10

Note: The export tariff raised the price of legal exports. So China's foreign buyers were now paying higher prices for legal as well as illegal smuggled rare earths; but China did not raise prices for its domestic buyers.

(d) Mountain Pass revival "Rare Earth Production Rises At Molycorp’s Mountain Pass Mine",  Sentinel, 2/1/15

Note: The high prices charged by China's legal and illegal rare earth producers encouraged investors to believe that Molycorp’s Mountain Pass mine could reopen, charge lower prices than China's producers, and be profitable,

/-----/-----/-----/


(e) President Obama went to the WTO ... "The U.S. Will Bring a New Trade Case Against China", The White House, 3/13/12

(f) The WTO rejected China's claims ..."China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum", World Trade Organization, 5/20/15

Note: The WTO rejected China's sustainability rationale. If rare earths were limited, China should have also reduced their access for its domestic buyers, but it did not restrict its domestic buyers.

However, the WTO does allow its members to impose excise tariffs on products that are listed in a table in Appendix 6 of its Accession Protocol when the nation is admitted to the WTO. If the reader clicks this link, China Accession Protocol, then searches for the words "Products subject to export duty", China's table will be displayed.  The reader will see that China did not include "rare earths" in its table, so the WTO declared that China would have to remove the tariffs on its rare earth exports.

/-----/-----/-----/


(g) China drops export tax ... "China scraps quotas on rare earths after WTO complaint", The Guardian, 5/1/15

(h) "Molycorp is filing for Chapter 11 bankruptcy", Fortune, 6/25/15  ... "Five years ago, Molycorp was flush with a market value $6 billion because China, the world’s most dominant supplier of rare earths, had restricted their exports. But those fortunes faded when China eased its export rules and as magnet and battery makers turned to rare earth alternatives." 

Note: When China's legal sources dropped their prices, its illegal smugglers were forced to drop their prices. Molycorp could not afford to offer comparably low prices, so it filed for bankruptcy.

Molycorp was just one of many rare earth mining and refining operations outside of China that were devastated when China's legal and illegal exporters overwhelmed global markets with low priced ores and refined rare earth eleements.  Interested readers can check the following links to reports that describe the bankruptcies and near bankruptcies inflicted on other rare earth companies during the turbulent 2010 to 2016 period.
With the benefit of 20-20 hindsight, the reader can see that the Obama administration's successful appeal to the WTO tribunal was a pyrrhic victory. China's "loss" was a strategic triumph that enabled it to greatly strengthen its dominance of the world's markets for rare earths. 
  • China knew that 'everybody' dreaded the day when its ever greater dominance of the world's rare earths markets would lead it to charge sky high 'monopoly' prices.

  • And China knew that its crackdowns on smugglers would pressure the smugglers to raise their prices while they were still in operation. But just in case the smugglers 'got the memo' about the coming crackdowns, but perhaps might need a tad bit more time to fully appreciate the memo's implications, China graciously provided its smugglers with a five month 'warning' before the crackdowns began ... 😎

  • China knew that its 'failure' to reduce its domestic customers' access to rare earths would invalidate its professed concerns about the sustainability of its limited supply of rare earths ... 😎

  • China also knew that the WTO would reject its imposition of export tariffs that raised the prices of legal exports because China had somehow 'forgotten' to include rare earths on its list of Products subject to export duty in its Access Protocol ... 😎

  • So China knew that the WTO's rejection of its justifications would 'force' it to cancel its export tariffs, i.e., to lower the legal prices of its exports

  • Of course, China's smugglers had to reduce their illegal prices lower than the lower legal prices because that's what black markets are all about.
Bottom line: 'Everybody' feared that monopolies could charge sky high prices. But 'everybody' seems to have forgotten that near monopolies, like China in 2010, can crush their remaining competitors and thereby become full monopolies by flooding the market with goods at prices that their weaker competitors cannot match.


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