Rare Earth elementsPotential China Taiwan deal on rare earth metals
Taiwan could soon start receiving shipments of rare earth minerals from China in a move that could help bolster its technology and chemical companies; last week, officials from China and Taiwan met to discuss a potential deal that would ease some of China’s export quotas and tariffs on rare earth shipments; the deal with Taiwan would likely do little to affect global prices or trade as Taiwanese companies purchase far less than their Japanese, European, and American counterparts; but some analysts believe the deal would still benefit Taiwanese companies by giving them a competitive advantage
Taiwan could soon start receivingshipments of rare earth minerals from China in a move that could help bolster its technology and chemical companies.
Last week, officials from China and Taiwan met to discuss a potential deal that would ease some of China’s export quotas and tariffs on rare earth shipments.
Starting in 2009, China, the world’s largest producer of rare earth metals with 95 percent of global output, has steadily reduced its export quotas of. In 2010, exports were 40 percent below 2009 levels and China has announced that it will cut export levels by 35 percent for the first half of this year.
Since China began reducing its exports of rare earth minerals, the price of rare-earths has increased more than 1000 percent.
The deal with Taiwan would likely do little to affect global prices or trade as Taiwanese companies purchase far less than their Japanese, European, and American counterparts.
With more Taiwanese manufacturing moving to China, Taiwanese imports of rare metals have fallen to 1,000 to 2,000 metric tons, down from 4,000 to 5,000 in 2004.
But, Tang Ming-Je, the vice president of National Taiwan University, believes that the deal would still benefit Taiwanese companies.
“If an agreement were to be made, it would mean a competitive advantage for Taiwan’s electronics industry and could eventually lead some Japanese component manufacturers to move operations to China,” he said.
Many observers believe that the rare earths deal is largely a political move by China to shore up support.
President Hu Jintao has actively sought to foster better relations with Taiwan in the hopes the country will eventually become part of China of once more.
Meanwhile Taiwanese President Ma Ying-jeou rose to power promising better relations with China and has sought to more closely align Taiwan to China economically with a free trade agreement.
The deal is still in its early stages and Cheng Cheng-mount, an economist with Citigroup, believed that the agreement could fall through for several reasons.
“Obviously, China wants to do a favor for Taiwan to win people over. But in reality, it’s difficult to do so because they have to face internal interest groups.”
Cheng added that the deal could violate World Trade Organization regulations by offering preferential treatment to Taiwan, and in the past, China has often made promises that it was unable to keep in previous trade negotiations.
