Discuss the Policies That Will Be Most Effective in Europe, in Response to China’s Rare Earths Export Policy. Essay

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Essay: Discuss the policies that will be most effective in Europe, in response to China’s rare earths export policy. China is planning to effectively limit the supply of rare earths to other countries. They are limiting rare earths in order to improve their sustainability, as part of their new five year plan, through implementing export quotas - since the 1980’s China has experienced high level of economic growth, for example, between 2000 and 2010 their average annual economic growth was over 10%. This has come at a great cost, having large effects on the environment; people in towns like Shanxi, in the West, wear face masks to school as the air pollution from the industry is so bad. Thus, the government is looking to change its targets, focusing more on sustainability. However, this could be a significant issue for countries as China accounts for 97% of rare earth production and rare earths are needed for 25% of modern technologies- this would particularly effect places such as Europe were they rely on mainly tertiary and quaternary production. Thus, Europe must implement effective policies, in response. An export quota on rare earths will effectively restrict the amount of a product that is available for Europe to buy. This quota acts like a tax, in that it limits the amount of the product that is supplied on to the global market. As demand for rare earths is strong, even a light export quote implemented by China will inevitably drive up the market price, thus China’s revenues and profits should increase - they earn higher rent from their assets and therefore they will experience supernormal profits, of if they’re already experiencing super normal profits, they will increase. The application of export quotas on rare earths will have significant consequence for Europe; demand for rare earths are rising - demand for rare

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