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Mint
10-06-2025
- Business
- Mint
China risks overplaying its hand by curbing rare earth exports
China has once again weaponized its dominant position in the supply of rare earth minerals. It has imposed stringent export curbs on these elements that are critical inputs in a range of industries from automobiles to aerospace and defence. The move comes as a response to US restrictions on the export of semiconductor technology to China. These battles are being waged against the backdrop of a broader truce in the once-escalating trade war between the world's two largest national economies. The Chinese chokehold on the supply of rare earth minerals has sent a jolt through many industries in other parts of the world, including India. For example, there are fears that assembly lines in the automobile industry will grind to a halt in the coming weeks unless China starts exporting rare earth minerals again. Also Read: Barry Eichengreen: US export curbs on high-tech enablers have rarely worked This is not the first time that Beijing has restricted the flow of rare earth minerals across its borders. It did so in 2010 after a dispute with Japan on the high seas, and was forced to roll back its export curbs by the World Trade Organization in 2015. Even though China's export ban was targeted at Japan, other countries naturally saw it as a signal of what could happen in the years ahead. The effectiveness of any export restriction depends on three factors. First, how important the input is in the production structure of the country's economy. Second, how easy or difficult it is to increase the production of that input in response to higher prices that naturally follow restricted supplies. Third, how concentrated the production of that input is in one country or in a small cartel of countries. Rare earth minerals are needed in many important industries, their supplies are inelastic and China has a massive share in their production. That suggests that the rest of the world will be at the mercy of China. Also Read: China's export ban on key minerals may have a silver lining for the US However, such events create incentives for governments as well as private companies to respond strategically. There is perhaps a lesson to be learnt here from what happened after the first oil shock to hit the world in 1973. The oil embargo that year brought many economies to their knees, but it also led to a search for new energy supplies as well as incentivized companies in sectors such as automobiles to build more fuel-efficient products. Can that happen in the case of rare earth minerals as well? In a recent paper titled 'Trade and Industrial Policy in Supply Chains: Directed Technological Change in Rare Earths, National Bureau of Economic Research Working Paper,' four economists have taken a closer look at the broader consequences of the earlier supply squeeze. Laura Alfaro, Harald Fadinger, Jan S. Schymik and Gede Virananda have shown that export restrictions on rare earth minerals imposed by China in 2010 triggered a surge elsewhere in technological innovations as well as exports in sectors that used rare earth minerals as inputs. More specifically, they found a surge in patents in downstream industries that use rare earth minerals, both in terms of using them more efficiently as well as developing alternatives. This increase in patents in countries outside China exceeded the overall rise in patents in industries that use rare earth minerals. Productivity, as proxied by exports growth, also improved. In other words, technological dynamism helped the rest of the world adapt to Chinese monopoly power in rare earth minerals. Also Read: Ajit Ranade: The success of 'Made in China 2025' alarmed the West This is a more general lesson. Jensen Huang, the head of chip-maker Nvidia, said at a recent technology industry event in Taipei that firm attempts by successive US administrations to deny China access to advanced technology have actually spurred rather than hindered Chinese innovation. 'The local companies are very, very talented and very determined, and the export control gave them the spirit, the energy and the government support to accelerate their development," Huang was quoted as saying by The Guardian. Parsing his statement provides two lessons. First, that there needs to be a private sector innovation ecosystem that has the ability to respond to either higher prices or restricted supplies. Second, there have to be at least some additional government incentives as well as policy clarity for innovators. They complement each other. The point is not to tell a sanguine story about how all will be well in the long run. It is instead to point out that dynamic economies adapt to changing circumstances. 'In capitalist reality as distinguished from its textbook picture, it is not (traditional) competition that counts but competition from the new commodity, the new technology, the new source of supply, the new type of organisation," wrote the prophet of innovation, Joseph Schumpeter, in Capitalism, Socialism and Democracy, his classic work. The Chinese dominance in rare earths is undoubtedly a strategic lever that Beijing will use to increase its geopolitical heft in an unsettled world. However, the overuse of such power will create strong incentives for others to adapt by innovation—as everyone from West Asians to Americans have learnt over the years. The author is executive director at Artha India Research Advisors.
The Hindu
01-06-2025
- Politics
- The Hindu
India warms to foreign law firms, but legal concerns simmer
In the winter of February 2000, a sea of black coats surged towards Parliament House. Braving water cannons, tear gas, and lathi charges, over 40,000 lawyers staged an intense protest aimed at blocking the entry of foreign law firms and lawyers into the Indian legal system. A quarter of a century later, the landscape has shifted dramatically. On May 14, 2025, the Bar Council of India (BCI) — the regulatory authority for the legal profession — formally notified a set of rules permitting foreign law firms and lawyers to practice in India. Their role, however, is restricted: they may operate only in non-litigious matters, limited to foreign and international law, and solely on a reciprocal basis. A past steeped in resistance The nationwide agitation 25 years ago was triggered by the Law Commission of India's Working Paper, which proposed amendments to the Advocates Act, 1961, to allow foreign legal consultants to practice in India. 'The entire legal fraternity stood united,' recalled advocate and former Delhi Bar Association president Rajiv Khosla, who had led the lawyers' march and lost an eye in a scuffle with the police. The Supreme Court later reinforced this sentiment in March 2018 when it ruled that foreign law firms and foreign lawyers could not practise law in the country either on the litigation or non-litigation side. One of the central arguments then was reciprocity, given that Indian advocates were not allowed to practice in the U.K., U.S.A., Australia, and other foreign nations without complying with onerous restrictions such as qualifying tests, proof of experience, and work permits. The turnaround In March 2023, the BCI floated a notification permitting foreign lawyers to function in non-litigious areas only. Although that notification was challenged in the Delhi High Court, and remains under judicial consideration, the latest iteration in May 2025 has cemented the policy shift. Lalit Bhasin, chairman of the Society of Indian Law Firms (SILF), who was once a vocal opponent of foreign law firms entering India, reflected on the shift in tone: 'We welcome them. They can learn from us, we can learn from them. It would be a good opening for our young lawyers also who can work with them.' Still, he expressed concerns that the latest BCI notification might contravene the Supreme Court's 2018 rulings. Mr. Bhasin said the BCI's 2023 notification was kept in abeyance, but the current development amounts to 'old wine in a new bottle.' 'Our view is, why can't the Parliament just amend the law, that is, the Advocates Act, giving liberty to foreign lawyers to come to India to practice? Because the existing law does not permit it,' Mr. Bhasin stressed. 'Encouraging global integration' Haigreve Khaitan, Senior Partner at Khaitan & Co, called the move 'a positive step'. He said, 'This will result in increased knowledge sharing, innovation, and faster adoption of global best practices. Regulatory reforms must now ensure a level playing field.' 'The amendment's spirit is to safeguard domestic litigation while encouraging global integration,' said Abhishek Prasad, founder of his eponymous chambers. It also creates new opportunities for Indian lawyers and law firms through the dual registration provision, which allows them to practice foreign and international law without relinquishing their right to practice Indian law, he added. Shailendera Singh, partner at GnS Legal, added a pragmatic note: 'The amended Rules do not specify if foreign lawyers are restricted in appearing in international arbitration only when the applicable law is Indian law, making it possible for them to appear so long as one of the parties is a foreign party.' 'Reciprocity is an illusion' Former Bar Council of Delhi chairman K.C. Mittal raised questions about reciprocity. 'The whole action is against the Advocates Act, as the same requires amendments in the basic Act. The claim of reciprocity is illusionary. Reciprocal means our law degree and enrolments certifies are recognised by them and any lawyer from India can go, appear and argue but it's not so,' he said. Mr. Khosla echoed these concerns. 'So far, the BCI hasn't specified which countries have extended reciprocal access to Indian lawyers. Other countries aren't accepting us, yet we're moving ahead — I don't understand why,' he said.
