To the average American iPhone owner, the components and inner workings of the smartphone are somewhat of an enigma. To the poor farmers of Baotou, a city in northern China’s Inner Mongolia Autonomous Region, they are less so. Though the grand majority of Baotou farmers barely earn enough to feed and clothe their families, much less purchase an iPhone, they understand more about what it takes to make the apple on your screen light up than you would probably ever care to. Baotou is the epicenter of the planet’s rare earth metal mining industry, and its farmers are intimately familiar with the grievous ecological and public health side effects that come along with it. It is thanks to Baotou and several other cities colloquially known as China’s “cancer villages,” where rare earth mining and refining has destroyed cropland and poisoned water supplies, that we have cellphones, laptops, flat screens, electric cars, wind turbines, and missile defense systems. While environmental destruction and human suffering have been a byproduct of much, if not all, technological advancement in human history, the story of rare earth metal mining in China highlights not only the irony of today’s “smart” phones and “green” technology, but also the failures of the modern international trade system to balance competitive markets with human and environmental protection.
Many modern gadgets are comprised of a cocktail of 17 elements with unpronounceable names like Yttrium and Praseodymium. Known collectively as the “rare earth metals,” they are found in mineral ores in the earth’s crust, often chemically bound to radioactive materials, such as thorium. The process of separating rare earth metals from their ore requires massive quantities of highly toxic carcinogens, including ammonia and both sulfuric and hydrochloric acid. Though China possesses only 30% of the planet’s rare earth ore deposits, the country’s lax environmental laws have facilitated rapid growth of its mining and refining industries, which at their peak supplied more than 95% of the world’s tech industry demand.
Though China’s rare earth industry has fueled Silicon Valley’s entrepreneurship and innovation, it has wreaked havoc on the health of the country’s population and ecology. Birth defects, as well as high levels of leukemia and pancreatic and lung cancer, have become commonplace in villages where drinking water has been permeated by sludge waste from rare earth metal refineries. Toxic sludge dumps, known as “tailings ponds,” poison wildlife and kill vegetation in and around rare earth mines. In Baotou, contaminated groundwater from the world’s largest tailings pond, which lacks a proper lining to prevent toxic chemicals from leaching into the surrounding soil, moves at a rate of 20-30 meters per year towards China’s Yellow River several miles to the south, which supplies drinking water to more than 150 million people. Entire cities between Baotou and the Yellow River have been evacuated or residents mandated to wear face masks to prevent inhalation of the radioactive and carcinogenic dust from the mines’ waste dumps.
In 2006, citing the rising health and environmental costs of rare earth mining, China enacted taxes and export quotas on rare earth metals, sending price shocks rippling through the global tech industry and drawing World Trade Organization (WTO) litigation from the United States, European Union, and Japan in 2012. The U.S., EU, and Japan claimed China was breaking free trade laws by enacting protectionist policies, accusing China of using environmental concerns as a cover for policies truly aimed at pushing prices up, putting pressure on Japan in the midst of a territorial dispute between the two states, and giving domestic electronics producers an edge. The case against China was based on the fact that, though limiting exports, China did not restrict domestic access to rare earth metals, as would be expected if it were truly trying to clean up its rare earth metal mining industry. Upon these premises, the WTO found China in violation of the General Agreement on Tariffs and Trade (GATT), prompting China to lift its restrictions in early 2015 and reinstating the free flow of metals from China’s “cancer villages” to an Apple store near you.
Whether China intended its policies to further domestic economic goals or enable it to clean up its environment almost doesn’t matter. Either way, this case provides an illustration of the immense challenge developing countries face in the modern international trade system to successfully balance free trade with human and environmental protection. Under the current system’s incentive structure, there is inadequate room or impetus for environmental protection.
As it is, countries with low environmental standards can bring in much desired foreign currency by extracting, refining, and exporting raw materials at lower cost than states with more stringent environmental regulations. While under some circumstances GATT permits states to enact export restrictions in the name of environmental protection, it is difficult to determine when policies are enacted to further environmental goals versus protectionist schemes, making the implementation of this GATT article dubious at best. Developed states, which import cheap raw materials and would like to see this flow of inexpensive goods continue, have little motivation to encourage improvements in standards for environmental protection or public health abroad that might limit access to important natural resources or make them more expensive. Even if a country were to prioritize importing only materials extracted, refined, or produced in an environmentally responsible manner, it is currently illegal under international trade law for a state to discriminate against a product on the basis of its origin.
In the Chinese rare earth metal case, the US, EU, and Japan chose cheap raw materials over the protection of humans and ecosystems an ocean away. Though China’s policies were certainly not aimed exclusively towards environmental protection, they did have limited environmental and public health benefits—forcing the closure of several illegal, exploitative mining operations in the country’s south and giving the national government greater regulatory control over the industry as a whole. By opposing China’s export restrictions, the US, EU, and Japan guaranteed themselves cheap rare earth metals while setting a dangerous precedent for developing countries the world over looking to institute environmental protection measures: if you limit exports, even in the name of environmental protection, you’ll be brought to court. For the sake of Baotou’s farmers, and countless others like them, it is high time the international community took a fresh look at its trade laws. While competitive markets are important to help spur innovation and keep consumer prices low, they should not come at the cost of human lives and healthy environments.