Who's the rogue superpower?

[ajtr]

Who's the rogue superpower?​

Here's something that probably won't shock you: I tend to agree with Paul Krugman more than I disagree with him. But not always. Case in point is his column last Sunday, which condemned China's hardline response to Japan's seizure of a Chinese trawler that had violated Japanese waters, and especially its decision to pressure Japan by cutting off the export of rare earth materials. He went on to criticize some other Chinese actions (including its chronically devalued currency), and said this added up to a picture of China as a "rogue economic superpower, unwilling to play by the rules."

I agree that China's overheated response to the trawler incident was foolish, if only because it will reinforce Asian concerns about China's rising power and make it more likely that other states will start taking concerted action to resist its influence. It's normal for great powers to throw their weight around -- if you don't believe me, just read a good history of U.S. relations with Latin America -- but doing so before one's power position is fully consolidated is a bad idea.

By the way, with the exception of the War of 1812, avoiding stupid quarrels with powerful countries was one of the smartest things that the United States did in its rise to superpower status. Not only did it avoid tangling with other major powers until after it had created the world's largest and most advanced economy, it also let the Eurasian powers bloody each other in ruinous wars, jumping in only when the balance of power was in jeopardy and leaving itself in a dominant position after both world wars (and especially WWII). This wasn't a perfect strategy, or even a noble one, but it was supremely self-interested approach that ensured U.S. primacy for decades.

If China's leaders are really smart, they'd act in a similar fashion today. They'd let the United States run itself to exhaustion in the Middle East, Central Asia, and elsewhere, while they stayed out of trouble, cultivated profitable relations with everyone, and made sure that their long-term development plans didn't get derailed. Picking fights with neighbors over minor issues is pointless, especially now, and on this point Krugman and I are in synch.

Where I part company is his characterization of China as a "rogue economic power," and his conclusion that "China's response to the trawler incident is"¦ further evidence that the world's newest economic superpower isn't prepared to assume the responsibilities that go with that status."

For starters, this view assumes that China (or any other great power) has "responsibilities" to the global community. U.S. leaders like to proclaim that we have enormous "responsibilities" and "obligations" to the rest of the world, but this is usually just a phrase our leaders use to justify actions taken for our own (supposed) benefit. The leaders of any country are primarily responsible to their own citizens, which is why international cooperation is often elusive and why conflicts of interest routinely arise between sovereign states.

Moreover, the declaration that China is a rogue power that isn't "playing by the rules" neglects to mention that 1) many of these rules were devised by the United States and its allies and not by China, and 2) the United States has been all too willing to ignore the rules when it suited us. We went to war against Serbia in 1999 and against Iraq in 2003 without authorization from the U.N. Security Council, for example, even though we helped write the U.N. Charter that says such actions are illegal. Similarly, the US played the leading role in devising the Bretton Woods economic system after World War II, but it abandoned the gold standard in 1971 when this arrangement was no longer convenient for us.

The real lesson of the trawler/rare earth incident is that great powers can ignore the rules when they think they have to, and they can often get away with it. We should therefore expect China's leaders to pursue whatever policies they believe are in their interests, whether or not those policies are good for us, good for the planet as a whole, or consistent with some prior set of norms or rules.

Here's a penetrating leap into the obvious: sometimes China's interests will converge with ours; at other times, they will diverge sharply. Sometimes China's leaders will calculate their interests carefully and adopt smart policies for achieving them; at other times they will make costly blunders. Ditto their counterparts in Washington: sometimes U.S. leaders will act with insight and foresight and sometimes they will stumble headlong into disaster. Welcome to the real world. The bottom line is that it's neither illuminating nor helpful to hold China to a standard of "responsible" behavior that we fall short of ourselves. I mean, which country is currently detaining foreigners without trial in Guantanamo, and firing drone missiles into any country where it thinks al Qaeda might be lurking?

 

[ajtr]

Rare and Foolish​

By PAUL KRUGMAN..

Last month a Chinese trawler operating in Japanese-controlled waters collided with two vessels of Japan's Coast Guard. Japan detained the trawler's captain; China responded by cutting off Japan's access to crucial raw materials.And there was nowhere else to turn: China accounts for 97 percent of the world's supply of rare earths, minerals that play an essential role in many high-technology products, including military equipment. Sure enough, Japan soon let the captain go.

I don't know about you, but I find this story deeply disturbing, both for what it says about China and what it says about us. On one side, the affair highlights the fecklessness of U.S. policy makers, who did nothing while an unreliable regime acquired a stranglehold on key materials. On the other side, the incident shows a Chinese government that is dangerously trigger-happy, willing to wage economic warfare on the slightest provocation.

Some background: The rare earths are elements whose unique properties play a crucial role in applications ranging from hybrid motors to fiber optics. Until the mid-1980s the United States dominated production, but then China moved in.

"There is oil in the Middle East; there is rare earth in China," declared Deng Xiaoping, the architect of China's economic transformation, in 1992. Indeed, China has about a third of the world's rare earth deposits. This relative abundance, combined with low extraction and processing costs — reflecting both low wages and weak environmental standards — allowed China's producers to undercut the U.S. industry.

You really have to wonder why nobody raised an alarm while this was happening, if only on national security grounds. But policy makers simply stood by as the U.S. rare earth industry shut down. In at least one case, in 2003 — a time when, if you believed the Bush administration, considerations of national security governed every aspect of U.S. policy — the Chinese literally packed up all the equipment in a U.S. production facility and shipped it to China.

The result was a monopoly position exceeding the wildest dreams of Middle Eastern oil-fueled tyrants. And even before the trawler incident, China showed itself willing to exploit that monopoly to the fullest. The United Steelworkers recently filed a complaint against Chinese trade practices, stepping in where U.S. businesses fear to tread because they fear Chinese retaliation. The union put China's imposition of export restrictions and taxes on rare earths — restrictions that give Chinese production in a number of industries an important competitive advantage — at the top of the list.

Then came the trawler event. Chinese restrictions on rare earth exports were already in violation of agreements China made before joining the World Trade Organization. But the embargo on rare earth exports to Japan was an even more blatant violation of international trade law.

Oh, and Chinese officials have not improved matters by insulting our intelligence, claiming that there was no official embargo. All of China's rare earth exporters, they say — some of them foreign-owned — simultaneously decided to halt shipments because of their personal feelings toward Japan. Right.

So what are the lessons of the rare earth fracas?

First, and most obviously, the world needs to develop non-Chinese sources of these materials. There are extensive rare earth deposits in the United States and elsewhere. However, developing these deposits and the facilities to process the raw materials will take both time and financial support. So will a prominent alternative: "urban mining," a k a recycling of rare earths and other materials from used electronic devices.

Second, China's response to the trawler incident is, I'm sorry to say, further evidence that the world's newest economic superpower isn't prepared to assume the responsibilities that go with that status.

Major economic powers, realizing that they have an important stake in the international system, are normally very hesitant about resorting to economic warfare, even in the face of severe provocation — witness the way U.S. policy makers have agonized and temporized over what to do about China's grossly protectionist exchange-rate policy. China, however, showed no hesitation at all about using its trade muscle to get its way in a political dispute, in clear — if denied — violation of international trade law.

Couple the rare earth story with China's behavior on other fronts — the state subsidies that help firms gain key contracts, the pressure on foreign companies to move production to China and, above all, that exchange-rate policy — and what you have is a portrait of a rogue economic superpower, unwilling to play by the rules. And the question is what the rest of us are going to do about it.

 

[Armand2REP]

China using its 1.3 billion potential market to lure industry to its shores is not rouge, it is quite common among developing nations. When you control 95% of rare earths, you can dictate the market anyway you want. It is the developed nations fault for ignoring their own rare earths.

 

[pmaitra]

USSR used to be rogue; however, USA has surpassed USSR in it's rogue-ness. China is a potential rogue superpower. It already is a rogue Asian power IMHO.

 

[SHASH2K2]

China is one of the worst rogue country and has aspire to be one rogue superpower. The way they are bullying entire neighborhood and into proliferating nukes and missiles tech to other rogue nations like N korea, China and Iran. they are definitely Rogue . USA and Russia both never proliferated sensitive technologies like nukes and missiles.

 

[ajtr]

China's Tantrum​

China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted shipments of those materials to the United States and Europe, three industry officials said on Tuesday.

The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further intensify already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese leaders are willing to use their growing economic muscle.

Willing to use their economic muscle? Perhaps... but if so that muscle is about as big as my pectorals. (Read: practically non-existent.) "Rare earth minerals" aren't all that rare (there are large deposits in California, Brazil, India, and many other places, and the minerals can also be gleaned from recycled electronics), and China's going to lose when this hits the WTO. This is at most a minor annoyance to the U.S., Europe, and Japan, but it makes China look like a spoilt child who's refusing to eat his vegetables.
Unlike Krugman, I don't think the answer is to argue with the child. Better to let him sit at his place until the veggies are eaten. In other words, if China wants to be a major power in global politics, it needs to learn what that entails. Lashing out like a four year-old isn't how it's done. (Neither is responding in kind, as Krugman evidently wants.)I assume that this move is an attempt to signal to some domestic audience, but I don't know enough about China's internal politics to know what that intention might be. I'd appreciate any pointers in that direction. In the meantime, this is further evidence that China is simply not as mature of a global power as many think.

 

[ajtr]

China Watch: The Politics of Rare Earth Minerals​

Earlier this week, the U.S. Senate held hearings on a bill to jumpstart domestic production of "rare earth" minerals, in order to break China's near-monopoly on these little known but essential raw materials. Friday, I was asked to appear on Chinese TV to offer some background and insight on the issue.

"Rare earth" refers to a collection of 17 elements from the periodic table, with Star Trek-sounding names like holmium, europium, neodymium, and thulium. They tend to be found together, and exhibit similar chemical properties that make them useful — and in many cases vital — for a whole host of high-tech applications, such as superconductors, magnets, and lasers. Rare earths are essential ingredients in many emerging "green" technologies, including wind turbines and batteries for electric cars. A lot of advanced U.S. military hardware, including tank navigation and naval radar systems, also depends on rare earth-based components.

Despite their name, rare earth minerals actually aren't that rare. They're commonly found throughout the earth's crust. However, there are only a handful of places in the world where rare earths are found in high enough concentrations to make extracting them commercially feasible. Before the 1960s, the few rare earths that were needed were gathered from sediment deposits along rivers in India and Brazil (like those prospectors washing for gold with pans in Western movies). Then demand took off, especially for europium for use in making color television sets. Over half of this expanded global demand was met by a single mine, Mountain Pass, in the deserts of southeast California.

China began mining rare earth minerals in the 1980s, and by the mid-90s was well surpassing the U.S. in production. China had several competitive advantages over the U.S. First, it has some of the best concentrations of rare earths in the world, including the huge Bayan Obo mine in Inner Mongolia. Second, it had cheaper labor costs. Third, it had laxer environmental rules. Rare earth minerals are often mixed with radioactive elements, and processing creates low-level radioactive waste. The Mountain Pass mine, which had been bought in 1977 by Unocal, the oil company, began running into all kinds of regulatory problems concerning waste disposal, just as it was losing market share to cheaper Chinese competitors. It closed in 2002, leaving the market entirely to the Chinese. Today, China produce more than 96% of the world's rare earth minerals; Bayan Obo alone accounts for 45%. (The neat graph below is courtesy of Wikipedia, click to enlarge).

Given the critical reliance on rare earths for national security needs, not to mention promising new technologies, there's been growing concern over the past few years about this exclusive reliance on China as a sole source of supply. This concern has been heightened by recent Chinese moves to tighten export quotas, as well as talk (so far just talk) about banning the export of certain rare earths entirely, presumably to favor the development of domestic high-tech industries. Such worries were heightened even further this week as a result of the latest diplomatic fracas between China and Japan over some disputed islands in the East China Sea. It has been widely reported that, in retaliation for Japan's arrest of a Chinese fishing boat captain in the contested waters, China effectively halted shipments of rare earth supplies critical to Japan's electronics industry. China officially denied that any embargo had taken place, and shipments have since resumed. But the episode sent shivers down the spines of leaders around the world, crystallizing unspoken fears that a more powerful China might use its monopoly on rare earths and similar forms of economic leverage as a weapon. The next time they fall into a disagreement with China, they have to wonder, will China play hardball and cut them off from vital resources?

[When I showed up to speak on Chinese TV about this subject, I was told I could mention export controls but not the recent dispute with Japan, since China denied it had ever withheld rare earth minerals. I'm always willing to be diplomatic, but I don't censor myself. I told them that the Japan incident was a critical part of why other countries are concerned -- not recognizing it would be like trying to ignore the 800-lb. gorilla sitting in the room -- and that if they didn't want me to mention it, they better not put me on. We finally agreed that I would note the accusations/concerns that supplies had been withheld, as long as I also noted China's denials. Fair enough. But I find it interesting that, unlike most of my other interviews, this one has not been posted on their website. This is obviously a very sensitive subject in China. I also find it revealing that, on the same show, I was pointedly not asked to comment on the biggest story they ran that day, on U.S. House passage of a bill labeling China a "currency manipulator." The party line on that topic was set in stone, and clearly voiced in the news story -- alternative perspectives were not welcome.]

It's important to remember, though, that while China may have a competitive advantage in rare earths, it does not have a stranglehold. There are other sources of supply; they may not be as cost-effective, but they are available — and customers concerned about China's reliability as a supplier might be willing to pay a bit for some alternatives. The Japanese, who buy the majority of unprocessed rare earths from China, are certainly busy: Sumitomo (SMMLY.PK) and Toshiba (TOSBF.PK) are both setting up projects in Kazakhstan, and other Japanese investors are looking at buying mining rights in Vietnam. Lynas Corporation which trades on the Australian Securities Exchange, as LYC.AX plans to start tapping rare earth reserves in western Australia next year.

In the U.S., this July, Molycorp (NYSE: MCP) raised $394 million in an IPO aimed at reopening the Mountain Pass mine in California. So far, though, it's been a rocky start.

Prior to the IPO, the company's first request to the Department of Energy (DOE) for a $280 million government-guaranteed loan was rejected. Its initial share offering, pitched at the time as a pure "greentech" play, met with weak demand and came in priced below expectations, raising $100 million less than hoped.

But China's latest little power play may have changed the equation, shifting Molycorp overnight from a greentech to a national defense play. One bill introduced in Congress earlier this year proposes establishing a strategic stockpile of key rare earth minerals, as well as supporting U.S. production. Molycorp is hardly the only one standing in line — Lynas is pushing for Australia, as a key U.S. ally, to be included in any plan, and a slew of rare earth start-ups have already been launched to capitalize on excitement over greentech, potentially creating a fragmented market. But analysts say that only Molycorp and Lynas have the mining licenses and waste disposal experience to move ahead rapidly, and given the preeminent role the Mountain Pass mine once played in global production, Molycorp will almost surely find itself in pole position if Congress decides to act. [Disclosure: I've recently invested in Molycorp stock for precisely this reason.]

(It's interesting, by the way, that the Chinese nearly ended up owning Mountain Pass a few years ago, when the oil company CNOOC (CEO) tried to acquire Unocal, which owned the mine at the time. Of course, due to political protests from Congress, mainly unrelated to rare earths, the deal was dropped. Had it succeeded, the options available to Congress today might look very different.)

As for China, in my view it really shot itself in the foot. By flexing its muscles so eagerly, over a relatively minor incident, it alarmed its customers and possibly frightened them off, when a softer approach might have lulled them into continued and deepening dependence. There's no question that China can extract rare earths at the cheapest price, in purely monetary terms. But now China's trading partners must be seriously wondering, what could the real price amount to, when the bill eventually comes due?

Disclosure: Author holds positions in MCP

 

[badguy2000]

China is one of the worst rogue country and has aspire to be one rogue superpower. The way they are bullying entire neighborhood and into proliferating nukes and missiles tech to other rogue nations like N korea, China and Iran. they are definitely Rogue . USA and Russia both never proliferated sensitive technologies like nukes and missiles.

BTW, the oringial of CHinese nuke tech was "proliferated by USSR in 1950s.
Jew's nuke tech might come from USA.

 

[pmaitra]

BTW, the oringial of CHinese nuke tech was "proliferated by USSR in 1950s.
Jew's nuke tech might come from USA.

Yes, you are probably right. USSR was helping China at that time, only to face aggression on the banks of the Ussuri river by the Chinese. In any event, the donor and the recipient of such acts are equally accountable, isn't it? What you are stating sounds like upping the ante, like saying, "He did wrong, so I'll follow suit!"

Guess what, the very Pakistan that got nuke technology from China might one day become the latter's Achilles' Heel.

 

[neo29]

It was USSR during the cold war now its easily China. China with its expansionist policy and its bullying smaller nations in the east qualifies as a Rogue Super Power. Though it aint actually a complete Super Power.

 

[badguy2000]

To me, the more the rivals bash CHina, the more it proves that Chinse is on a right way to asskick the rivals.

So, I would hear more bashes from Yankees rather hear applauses from west.


BTW, usually, losers alway tend to complain everywhere,because complaint is the only way for them to spit out their complex of failure.
to me ,it is always an enjoyment to hear the complaint from losers .

 

[civfanatic]

Even during the Cold War, the US was far more of a rogue nation than the USSR.

Just look at how many wars the US started, and compare it to how many wars the USSR started.

 

[pmaitra]

To me, the more the rivals bash CHina, the more it proves that Chinse is on a right way to asskick the rivals.

So, I would hear more bashes from Yankees rather hear applauses from west.


BTW, usually, losers alway tend to complain everywhere,because complaint is the only way for them to spit out their complex of failure.
to me ,it is always an enjoyment to hear the complaint from losers .

You may call it bashing, but it is basically a world opinion being formed and mark my words, China will not remain as powerful as it is today, and it has converted quite a few neighbours into paranoid, threatened and injured neighbours, who are actually seeking a way to unite against a common threat.

 

[amoy]

:emot158: it's a flatter for China to be called 'Super' Power. And 'Rogue' is quite an honor (look who's labeling whom as rogue). In order to reach the height of the top 'Rogue' Uncle Sam, u have to be more rogue than a rogue

 

[badguy2000]

:emot158: it's a flatter for China to be called 'Super' Power. And 'Rogue' is quite an honor (look who's labeling whom as rogue). In order to reach the height of the top 'Rogue' Uncle Sam, u have to be more rogue than a rogue

Indian guys here, trust me, if one day India were label as "rogue superpower" by China, you would fee it more enjoyable and hornorable than Indians youself tagged India "India Shining"!

 

[pmaitra]

Indian guys here, trust me, if one day India were label as "rogue superpower" by China, you would fee it more enjoyable and hornorable than Indians youself tagged India "India Shining"!

Those are the golden words from you and I have complete confidence that you have spoken what you sincerely believe to be the truth. We may be rivals, but we have way too many things in common, and the most important of those common things is that we both want to outdo each other.

 

[amoy]

we both want to outdo each other

.
man, u don't understand Chinese. we don't want to 'outdo' India.

u eat curry, we have pepper... my best wish is let's not bother about each other

 

[SHASH2K2]

Indian guys here, trust me, if one day India were label as "rogue superpower" by China, you would fee it more enjoyable and hornorable than Indians youself tagged India "India Shining"!

Ok I accept that we are rogue power. we did proliferate Nukes and Missiles to Pakistan and N korea. We have only 2 friends in neighborhood and they are both rogue and we 3 form a good team . We are also supporting Iran in its quest for Nuclear arms. I am proud of being labeled as rogue .

 

[amoy]

Good that China has come to a point to halt (or reduce) export of rare mineral earth which were exploited at the cost of environment..

the U.S. Senate held hearings on a bill to jumpstart domestic production of "rare earth" minerals, in order to break China's near-monopoly

Why didn't US do it earlier?

 

[amoy]

we did proliferate Nukes and Missiles to Pakistan and N korea. We have only 2 friends in neighborhood and they are both rogue and we 3 form a good team . We are also supporting Iran in its quest for Nuclear arms. I am proud of being labeled as rogue .

wasn't India exploding nuke ahead of Pak?

who are your 'friends'? bangladesh? nepal? or sri lanka? if so why do u folks always cry about 'string of pearls'?