Obama vs. China: The battle over 'rare earths'

The U.S., the European Union, and Japan are talking tough on China, blasting the world's most populous nation for curbing the exports of 17 "rare earth elements," which boast magnetic properties that make them essential components in advanced computer and weapons technology. Without rare earths, we wouldn't have computer hard drives, hybrid car batteries, wind turbines, radar systems, and many other gadgets. And China sells more than 95 percent of the world's total supply of rare earths, putting it in a dominant position to control the market — and best its competitors. Here, a guide to the battle over rare earths:

Why does China have a near-monopoly on rare earths?

It's all about cost. China is estimated to possess only 30 percent of the world's rare-earths deposits, but mining rare earths is expensive, and can be highly damaging to the environment. In the U.S., it costs about $1 billion to open a rare earths mine, and it takes 15 years for the mine to become operational. China, on the other hand, takes advantage of "lax environment and worker protections" and "state-financed mining operations" to make rare-earths mining profitable, says Bloomberg. Corporations in the developed world can't compete, and have effectively ceded the market to the Chinese.

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What is China accused of doing?

In a complaint with the World Trade Organization, the U.S. and its allies claim that China has halved its exports of rare earths, which drives up prices. In addition, China is accused of setting exorbitant tariffs on rare-earths exports. China's policies are an attempt to "flex its economic muscle," says The Washington Post, by "aiding Chinese companies that use rare earths while driving up the costs of the metals" for the rest of the world. China's military also enjoys an advantage, since the use of rare earths is "widespread" in U.S. defense systems, says Politico.

What's next in the dispute?

China, which says the export quotas are necessary to protect its environment, and to ensure that its rare-earths mining is sustainable, technically has 60 days to settle the charges amicably. But it's unlikely they will, and analysts say that the case will probably drag on for years, forcing the U.S. and others to find other sources of rare earths.

Are countries starting to mine their own rare earths?

Yes. The U.S. currently has only one rare-earths mine, in California's Mojave Desert, which is boosting production. Another mine in Wyoming is expected to begin mining in five years. But there are "fewer than a dozen rare-earth mines outside China" that currently have the capacity to produce a meaningful amount of rare earths, says The Wall Street Journal.

Sources: Bloomberg, The New York Times, Politico, Reuters, The Wall Street Journal, The Washington Post