U.S+Called+Vulnerable+to+Rare+Earth+Shortages-+Wendy+S


 * NyTimes:** http://www.nytimes.com/2010/12/15/business/global/15rare.html?pagewanted=1&_r=1

**Date of the extract**- December 15, 2010

**Explanation of the article-** China has a lot of crucial and rare minerals that many countries, such as the U.S need for its production of powerful electric motors, energy-efficient compact fluorescent bulbs and many other clean energy technologies. It is estimated that it would take the U.S 15 years to break away from its dependence on Chinese supplies due to America’s lack of earth mineral shortages. Now, the problem is that, China might raise the export tax of these earth minerals; this will cause many problems to the U.S. but might benefit China. The U.S wants to keep using these minerals because the opportunity cost of not using these minerals is the cost of wind energy and the savings on other materials. So when the export tax rises, the American demand for these minerals might stay the same or rise because these minerals are crucial and inelastic, thus China will earn a lot of money from this. By raising the price, China is also creating a lot of competition between industries because China has cheap labor unlike the US, also Chinese industries do not need to pay export fees, so the products manufactured in China would be cheaper. This will cause competitions between green products made from China and America. This can be inferred with the graphs below. In graph one, if China increases the export tax, then the producer revenue after tax is imposed will be less than the producer revenue before tax (from PeWQe0 to CYQ10). In graph two, if China raises the export tax, then the prices of the green products will increase, and demand will decrease, causing a surplus of supplies.

**Vocabulary:** · Economy- the wealth and resources of a country in terms of the productions and consumptions of goods and services · Demand- The quantity of good or service that consumers are willing and able to purchase at a give price in a give time period · Supply-The willingness and ability of producers to produce a quantity of a good or service at a given price in a given time period · Taxes- A compulsory contribution to state revenue · Scarcity- The state in which wants are more than the amount that available resources can produce · Labor- A human factor. It is the physical and mental contribution of the existing workforce to production · Competition- Rivalry among buyers and sellers of outputs, or among buyers and seller of inputs · Opportunity Cost- The second alternative choice · Consumption- The process of using up goods and services · Utility- Measure of usefulness and pleasure · Commodity Agreement- Different countries work together to operate a buffer stock scheme · Inelastic demand- A product that as an inelastic demand, then a change in the price of the product leads to a proportionally smaller change in the quantity demand of it. (When the price is raised, the quantity demanded will not fall b much in comparison) · Macroeconomics- A wide view and consider the measurement of all the economy activity in the whole country · Positive statement- A statement that can be proven to be right or wrong by looking at the facts · Normative statement- A statement that is an opinion and cannot be conclusively proven to be right or wrong · Sustainable development- Countries should not use up resources too quickly and should not harm the environment, since this will stop growth taking place in the future · Subsidies- A payment made by the government to producers of goods and services

Graph 1:
 * Graphs:**

Graph 2: **Evaluation:** As an economist, I agree with the article because if China does increase the export tax, it will benefit the Chinese economy but damage the American economy. So depending on which side a person is on, China or the U.S, the policy of increasing the tax might or might not be a good thing. Personally, since China is a developing country, I do think that the Chinese government should increase the tax of earth minerals because it will aid China’s economy. Since China has cheap labor, producing green products will be cheap in China, leading to foreign and local businesses of green products in the country. However, the potential effects can hurt America’s economy because there will be more competitions due to expensive products and many companies will close down. A potential solution for the U.S is to open new mines in the country. There is another harmful effect that China should also look out for, and that is the natural resources in the long run. This is because if unsustainable development is to be achieved, China should not use all its resources all at once and should try to protect its environment (preventing radioactive leaks).