Source: New York Times                            Date: 21 September, 2011

China's bottlenecking of its rare earth metals has been to the detriment western nations' efforts to exploit energy-efficient commodities and alternate fuel sources.  Rare earth metals are used in energy-efficient bulbs and other green-energy products. Chinas decision to reduce exports and raise tarries may open a new market for Mongolia if rare earth production could begin.However, China's decision is also affecting international trade. Companies such as General Electric (GE) are receiving complaints from the United States about the rising costs of compact fluorescent bulbs because of rising rare earth prices. Fluorescent bulbs have risen 37 percent this year.  The United States and many nations in Europe have already passed laws to transition from incandescent bulbs to the more efficient variety, but rising prices have thrown a wrench in the process.
“The high cost of rare earths is having a significant chilling effect on wind turbines and electric motor production in spite of offsetting government subsidies for green tech products,” said Michael N. Silver, chairman and chief executive of American Elements.To address pollution, China halted its rare earth industry for three months and shut down a number of firms. It has also imposed tariffs and quotas on its rare earth exports for year. Since August, China's closed many of its rare earth factories for the installation of pollution control equipment that must be in place by 1 October. The government is ordering 31 mostly private rare earth processing companies to close this year in Northern China and is developing a single government controlled monopoly, Bao Gang Rare Earth, to mine and process ore there. It also intends to consolidate 80 percent of production from southern china into three companies by 2014.
The WTO prohibits China from curtailing exports, with no exception to rare earths. However, even if the WTO forces the Chinese government to remove its quotas and tariffs, its industry consolidation now under way would allow China to retain its control over exports. If state-owned companies limit sales to foreign buyers, the WTO cannot address the issue well.