Time to look beyond Chinese rare earths, says EU trade boss

(BRUSSELS) - European Union trade commissioner Karel De Gucht on Tuesday urged global partners to diversify mining sources for prized rare earths as a battle with China deepened over scarce supplies.

De Gucht spoke out as a row that began between China and Japan over access to 17 essential minerals used in high-tech products ranging from flat-screen televisions to hybrid cars threatened to turn into a worldwide protectionist rallying cry.

"This is going to become a very, very difficult problem if we don't find a way out," De Gucht told an EU-China conference in Brussels.

He insisted that a string of mine closures elsewhere was "very closely linked to the price policy of rare earths by China" and stressed: "I think we should come to a global understanding."

The United States and Australia have 15 and five percent respectively of global reserves, but stopped mining them mainly because of cheaper Chinese competition.

"It cannot be a (Chinese) tool in industrial policy, because that would have very large ramifications," De Gucht warned, fresh from an EU-China summit that broke down amid fears of a "war" on currency exchanges.

"It's obvious that we cannot continue being completely dependent on China," he underlined.

The EU and Washington are already pursuing China in the World Trade Organization over policies on other raw materials, and a European source did not rule out similar action eventually on rare earths, depending on how that case progresses.

The United States has also said it will raise the rare earths issue at the summit of Group of 20 major and emerging nations in South Korea next month.

China recently imposed restrictions on exports of rare earths in what experts say is a bid to maximise profit and strengthen its homegrown high-tech companies.

Last year, it produced 97 percent of the global supply of rare earths, although it is home to just a third of reserves.

China's commerce ministry has said it reserves the right to slash rare earths exports again to "protect exhaustible resources and sustainable development".

Tokyo said on Tuesday that India had agreed to provide a stable supply of rare earth minerals to Japan as the high-tech economy looks to diversify its sources.

De Gucht worries that the rare earths row is just one of many "hints that China is developing an industrial policy aiming at transferring as much as possible production to China".

He also reiterated recent calls on Beijing to ensure a "level playing-field" on public procurement or investment opportunities.