Opinion: Japan’s three-step plan to depend less on China

10/20/2010 1:31 PM EDT

It was obvious from the very beginning that this embargo thing is going to backlash on China, both politically and financially. It was a unwise move by the Chinese government. However, rare-earth mining is a high pollution industry, Chinese government has done something good to the world inadvertently: putting incentive to finding "cleaner" alternative or simply recycling the rare-earth metals through "urban mining".

10/20/2010 2:09 PM EDT

The beauty of technology; industrialized countries can now find solutions to situations like this, a process could be discovered that would make rare earth properties less important. The question is will financial interests promote or sabotage any solutions discovered.

10/20/2010 2:13 PM EDT

We should stand for free and fair trade at every step, whether it involve Japanese DRAM dumping (old news I know), capricious Chinese export policies, or insincere and insufficient protection of IP rights, or certain types of American auto industry subsidies by the United States. But it's an uncomfortable topic for a technology e-zine. I'm not saying it doesn't belong, just saying that it makes me uncomfortable.

10/20/2010 3:45 PM EDT

This piece raises the very important issue of treating experienced engineers with respect. Hired gun CEO's have made careers out of swapping experienced engineers for lower paid younger workers, mostly in low-wage countries, with no regard to productivity. It is time to start holding management accountable for off-shoring and downsizing decisions which prove to be a bad idea in the long run. One way to do this is by replacing instant gratification stock options by dividend only stock grants with 10 year maturities. The idea is to incentivize management to work for the long-term success of the business. If a manager’s bonus is 10 years down the road she will not pack up a rare-earth processing facility and ship it to China – as was done in one case in the US.

The Chinese threat, and it is a threat, of a rogue superpower need to be met head-on at the WTO. Appeasement is not an option. Japan acted prematurely in the fishing trawler incident and had to back down. We first have to acquire Teddy Roosevelt’s “big stick”.

10/20/2010 4:08 PM EDT

Its interesting to see how China dictates terms in business.I guess all credit goes to the government there.

10/20/2010 4:25 PM EDT

Well, I think it is fair to restrict export on the resources or technologies which they hold. Just like the words from Shimizu, "Shimizu proposed that Japan impose tighter export controls on high-tech technologies". Do you think it is fair to restrict technology export? These two ideas are the same.
The point is, it does need to mantain a good relationship with others.

10/20/2010 5:00 PM EDT

I think you have a point, Jun Yang.

However, there are some basic differences between what China is trying to do here and what Shimizu is implying.

Remember, W.T.O. rules bar export quotas and export taxes in most cases. They particularly prohibit the use of export restrictions to force other countries to buy more value-added products.

That's a different argument from so-called "export" restrictions, which a lot of countries do impose on their own missiles and other military high-tech technologies -- in the name of protecting national security.

But it's been speculated that this may be a hard case for Japan to win, even if the case is successfully brought to the attention of the WTO.


It's because the WTO rules have an exception for the conservation of scarce natural resources.
(Obviously, that's the argument China is using. Premier Wen Jiabao reportedly suggested in Europe last week that "conservation of resources" was China’s goal in restricting rare earth exports.)

Another reason why this may not be a slam dunk case for Japan is because China has not acknowledged the halt in exports through any documents or public statements. The WTO requires that documentation or public statements.

So, it appears that diplomacy demands a lot more patience from all of us, before it succeeds. But of course, that doesn't mean we should give up that venue, in my humble opinion.

10/20/2010 5:59 PM EDT

It matters not, Japan is an engineering powerhouse. Let the government challenge the engineers and a new way will be found. It is a great nation and China is just making a mistake. Japan will get over it. This country has brainpower and that is what matters, not rare earth materials.

10/21/2010 2:46 AM EDT

Permanent magnets are used inside compact motors which are used inside hybrid cars: I do not see any future in electric cars, anyway.

As soon as we have the solar power infrastructure, we should generate hydrogen by electrolysis (70% eficiency already achieved) and power our cars, using normal otto motors, with hydrogen. BMW already has them.

Then, the chinese can give away their neodymium
for free: because nobody needs it any more.

10/21/2010 2:58 AM EDT

Well written article.

It's no surprise that engineers may not want to comment about the rare earth embargo, for fear of retaliation. After all, the embargo itself was retaliation. Retaliation is a common factor across most of humanity, and to be expected, unfortunately. It is tolerance and good will that are in short supply.

Concerning the related issue of the so-called shortage of experienced engineers, that is an easy to problem to solve, as Prof. Shimizu noted. You just have to supply better conditions and security, and experienced engineers will be there.

Finding substitutes for rare earths sounds like exciting work. We have the people to do it. We just have to retrieve them from the garbage can, where they've been tossed.

10/21/2010 4:24 AM EDT

Ther are rules and lines specified by WTO. All need to go inline and help each other. But when China wants to go away from it one needs to find out to bring china also in line which is very important. Is China does not require anything from japan.There may be some items which china needs from japan. That is the key to bring China in line now. The 3 step program is also quite possible and may take its owm tiime.

10/21/2010 10:00 AM EDT

If I read correctly, Japan already reserved those "earth-supplies" silently for at least the next 50 years.

Driven by profit, many companies in China have been selling these supplies at price close to dirt to countries like Japan freely for years. I think Chinese government did the right thing this time. Not to mention how polluted they are when they're made in China.

It sickens me each time who ever "originally from Japan" wrote articles like this. While it's not taught in US classrooms, Japan is the only country that raped China which once was his teacher and never regret for that, you can never understand their soul under their super fake humble behaviors.

10/21/2010 10:15 AM EDT

I liked this article. I have had experience with Japanese engineers, both in the States and in Japan, and to use an idiom, "it was a blast." I would cheerfully work with the Japanese again. One thing in the article did ring a bell: the notion that engineers are uncomfortable discussing political issues and the effect of these issues on their industry. Well, too bad. Wake up. Head out of sand. Political issues have enormous effect on us and our industry, and if we, working engineers, do not understand the political issues and weigh in on the public debate, to whom will this task be left? Politicians? Oh, Lord... Lay (non-engineering) members of the public? That's fine, they have a vote, but wouldn't you believe that non-practitioners on both sides of a question would welcome the input of professionals? Whether you are inside or outside your comfort zone with the side-effects of politics, you need to take a position and state it.

10/21/2010 10:09 PM EDT

China has been observing Japan closely, be it for political system, like how to look democratic and still have a one-party rule for over 50 years, or how to become an economic powerhouse. Japan has never been a beacon of free trade, as any company trying to sell something into Japan and discussing with the MITI found out (anyone remembers the ski & Japans snow is different story?).
Chinas advantage is that they have bigger carrots than Japan in the 70ies, and they are going to use it. Take this rare earth story and oombine it with the mysterious Chinese electric cars by - forgot which year - 2013?2015? Millions on the road. Except they dont have the technology now. So what they do is force the overseas car makers to set up JVs in China with a major Chinese shareholder, and get their hands on the technology. The raw materials will stay in the country, if the car makers want to get their hands on them to make EVs, they probably have to set up shop there first, China is gong to look like a new green powerhouse, they will have their millions of EVs on the road, and dont even have to lift a finger. Not to mention all the jobs and further downstream investment this is going to generate. Its a sure winner.
I think the Western nations better wake up to that.

10/22/2010 10:59 AM EDT

Correction: The job shortage for experienced engineers [who can live on rice and beans] is a serious problem in the United States.

10/22/2010 10:42 PM EDT

I am old enough to remember the history of rare earths magnets. SmCo was developed by Dr Strnat U of Dayton about late !96os. NdFeB was developed by General Motors Research Labs about late 70's 0r early. They built a sucessful Mfg Plant in Indiana & R&D in North Carolina. Not looking ahead to the future, G.M. sold both Lock Stock & Barrel to the wise Chinese Who Shipped all to China. Workers in the field knew it was a tragic mistake. Incidently PtCo (not commercially viable) was the heart of the first electric wrist-watch in 1955. The metalurgist was M Walmer who started Electron Energy in Pa.which is still the the largest US SmCo magnet producer. We used to produce 50% of world's rare earth supply until the Chinese forced every one out of business,

10/26/2010 8:15 PM EDT

(quote from another thread)

10/26/2010 2:49 PM EDT

Japan's dream to dominate the electric car business might be finished if nobody sells them the material.

Can US car makers capitalize on this opening?

You can't make people sell things they don't want to sell, unless you send in the Japanese Imperial Army. The Chinese remember that very well.
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paul.delamusica 10/26/2010 3:04 PM EDT

Yeah, last time when FDR refused to sell them the scrap iron, they retaliated by bombing the Pearl Harber.

Wonder what their response would be this time.

10/27/2010 1:19 AM EDT

"..what you have is a portrait of a rogue economic superpower.."
I think this is an exaggerated fear and to be frank, the world trade environment has always allowed nations to get away with what they could. When it comes to business and money, there have been no saints. Not even US and european nations!

10/27/2010 6:23 AM EDT

This article is a classic example of sour grapes by someone who is being beaten at their own game.

The US forbids the export of many technologies because of "national security interest" - especially in the IT/comm space. How easily people are willing to protect and accept their own dubious practices as long as they provide benefits! For example, who ever complained about the common practice of patent trolling to throttle potential competitors? Or corporate bosses crying to Uncle Sam for preferential treatment in the name of "free trade" and bailout money to "save jobs". Or for that matter, invading and occupying foreign nations to gain control of their resources?

To attack China for excelling at the game which the US originally invented is pure hypocrisy.