A political economy of China's export restrictions on rare earth elements

Frank Pothen and Kilian Fink

No 15-025, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We investigate why governments restrict exports of exotic raw materials taking rare earth elements as a case study. Trade restrictions on exotic materials do not have immediate macroeconomic effects. Relocating rare earth intensive industries is found to be the main reason behind China's export barriers. They are part of a more extensive strategy aiming at creating comparative advantages in these sectors and at overcoming path dependencies. Moreover, export barriers serve as a second-best instrument to reduce pollution and to slow down the depletion of exhaustible resources. Growing domestic rare earth consumption renders those increasingly ineffective. Rising reliance on mine-site regulation indicates that this fact is taken into account. Rare earth extraction is dominated by a few large companies; the demand side is dispersed. That speaks against successful lobbying for export restrictions. It appears as if the export barriers are set up to compensate mining firms.

Keywords: Rare Earths; Export Restrictions; Political Economy (search for similar items in EconPapers)
JEL-codes: D78 P26 Q37 Q38 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cna, nep-ene, nep-int, nep-pol and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:15025

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