Rare earth metals are used to make powerful neodymium, praseodymium, dysprosium and terbium magnets, defense products and many electronics.
Trade disputes can address country interests over costs, competitive industry positions, or strategic supplies, which all have different relevant export levels and time horizons to consider.
China produces a large share of these goods and accounts for the majority of the worlds exports, especially lithium-ion batteries and neodymium magnets.
But lower labor costs and less strict environmental regulations in China have now enabled the country to be the world's predominant supplier of rare earths.
[4][5] China had levied duties and implemented quotas on exporting rare earth elements since 2006 [citation needed].
Dispute arose when the Chinese government reduced its export quotas by 40% in 2010, sending the rare earths prices in the markets outside China soaring [citation needed].
Critics pointed at this incident to argue that China was not above using its dominance in rare earths production to gain leverage in international negotiations.
[8] China argued that its restrictions were legal because WTO regulations allow countries to impose export duties and quotas for reasons of conservation and to protect plant, animal, and human safety.
China's restrictions gave its domestic firms preferential access to the rare earths, which was against the principle of “non-discrimination” that WTO members are obligated to follow.
However, in response to the WTO action and this growth in competition, China dropped the price of rare earths significantly, making these entities less attractive for investment and, in the case of Molycorp, unsustainable, forcing it into bankruptcy in June 2015.
[12] The rare earths dispute formed part of the storyline in Season 2 of the Netflix series House of Cards (Real Clear World) and Call of Duty: Black Ops II.
[13] From February to May 2015, the Thyssen Bornemisza Museum ran an art exhibition titled RARE EARTHS related to the dispute, featuring seventeen commissioned works, one for each element.