23 October 2010

What If It Were Not Rare Earth Minerals But Food?

According to media reports, China cut the export quota of rare earth minerals — a group of 17 elements used in the manufacture of a range of products such as LCD panels and hybrid vehicles — in the second half of this year by 72 per cent and plans to cut supplies by a further 30 per cent in 2011.

Separately, Japan and the US claimed that China slowed down customs clearance of exports of rare earth minerals to their countries recently to show its displeasure with them.

The Japanese believed that China was retaliating against its detention of the captain of a Chinese trawler involved in a collision with two Japanese coastguard vessels off the disputed islands of Senkaku (or Diaoyu, as they are called in China).

The US believed that China was retaliating against its decision to investigate whether China was violating international trade rules with policies to subsidise its clean energy industries.

Although China has only one-third of the global reserves of rare earth minerals, it accounts for 90 per cent of the global supply.  Some believe that the Western countries are to blame for this situation — they had shut down their rare earth mineral mines when they were unable to compete with the lower cost rare earth minerals from China.

China believes it has the right to decide for itself how much rare earth minerals it wishes to produce and to export, but not everyone agrees with this view.

The U.S., European Union and Mexico have complained to the World Trade Organisation last year that China's export restrictions on minerals such as bauxite and magnesium discriminated against foreign manufacturers that use the inputs and gave an unfair advantage to Chinese producers.  The WTO will not publish a ruling until next April instead of this year.

These events show that just-in-time manufacturing with its lean inventories is a risky practice.  It is also risky to shut down mines or any other production facility within a country's borders simply because it is not competitive, unless there are reliable alternative sources.

These events have also prompted several countries to intensify their efforts to recover rare earth minerals through recycling.

The shortage of rare earth minerals is painful to a country's industries, but it is not the end of the world.

The loss of supply of food will be.

Can Singapore afford to rely on other countries to supply it with food, or with enough food?  Even if Singapore companies own, or have contracted to buy produce from, the relevant farms located in other countries, the governments of those countries may impose export quotas or block or slow down exports of vital food when it comes to a crunch.  Or organisations in those countries may block the export of, or seize, the food that they desperately need for their people.

Diversifying Singapore's sources of food will help, but may be prove to be of limited usefulness if there is a global shortage of a certain type of staple food or a certain group of staple food.

Singapore should re-think its strategic priorities and set aside land and other resources for farming.  It is not high tech, not high value-add, not glamorous, but it is vital for the country's survival.

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