Embargo or Environmental Protection?
Research for Online Investors

by John Dalt

10/20/10

Rare earth minerals are the lynch pin of many high-technology devices.  We wrote about the importance of Rare Earth Elements on Sept. 2.  Rare Earths are back in the news, again.  China knows how to pull the levers of ‘Free Trade’ without triggering any of the nasty little problems that come with controlling the market.  The World Trade Organization (WTO) has rules against embargos.

When is an embargo not an embargo? According to the Chinese they are holding up exports of Rare Earths for ‘inspection.’ What inspection is needed of raw materials? We don’t know unless they suspect there are diamonds hidden in the dirt and rock.  By restricting Rare Earth elements to the rest of the world, the Chinese force production of many high tech consumer items to stay in or move to China.

The New York Times had a good article yesterday about China widening their embargo on Rare Earths without actually calling it an embargo. They are using the world’s developed economies dependence on Rare Earths supply to retaliate for the U.S. and European pressure on China’s subsidies of clean energy technology and manufacturing.

Wang Baodong, a Chinese spokesman at their embassy in Washington said the restrictions on rare earths are to ‘protect the environment.’  “With stricter export mechanism gradually in place, outbound shipments to other countries might understandably begin to feel the effect,” Mr. Wang said in an e-mail. “But I don’t see any link between China’s reasonable rare earth export control policy and the irrational U.S. decision of protectionist nature to investigate China’s clean energy industries.”

We are traveling today on business, and plan to stop and see two daughters at the University of Kansas.  They are both business majors, one with an additional degree in Chemistry!  Like all parents, we are proud of them.  You can read more about the present rare earth export restrictions in the New York Times.

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Stupid is right.----subscriber D.C.

The unions will not go down easy.  Look at France the last few days...---paid up subscriber T.M.

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Editor’s note:  Our quotes are generally from great philosophers, J.P. wrote this on his comment about the union vote in the GM stamping plant in Indianapolis referred to yesterday.  I couldn’t pass up sharing it with you.  So true.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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