Chapter IC, Problem 7.1CDQ

Summary Introduction

Case summary:

One of the set of 17 chemical elements of periodic table is rare earth metals. This metal is used in high technology products. Later it is found that it is a toxic and hazardous element.  So many environmental regulations were framed to restrict the usage of rare earth metal. This paved way for Country CH as world largest and leading exporter and producer. Country CH imposed tight quotas on the rare earths export. It exports 50,000 tons and the tight quota restricts to 30,000 tons and 31,000 in the year 2012 and 2013.

The reason behind the tight quota is that many of Country CH companies cannot meet the environmental standards. This lead to increase in price outside the Country CH. This is a strategy of Country CH to benefit the domestic manufacturers.

It violates Country CH’s obligation under WTO. World trade organization began its new investment on it. Many companies started to use substitutes for the metals. There were 350 rare earth mine projects outside Country I and Country CH.

Characters in the case:

• Country CH
• Country I

Introduction:

Export refers to sending of goods from one country to another country and whereas import refers to receiving goods from one country to another country.

To discuss: The group benefited from the imposing of export quota on rare earth metals

Summary Introduction

To discuss: Whether the domestic manufacturers have significant cost advantage.

Summary Introduction

To discuss: Whether it increases the quality and environment standards.