China’s Rare Earth Element Spider.

“It takes seven [metric] tons of acid to produce one ton of rare-earth oxides, and the production creates a lot of ammonia, heavy metals and other pollutants,” Mr. Zhu said. “Our policies are entirely for protecting the environment, resources and sustainable development” and “are in accordance with WTO rules,” he said.

Yesterday China once again invited western firms to team up with Chinese firms “on rare-earth technology ventures, particularly on environment-friendly projects.”  It is of course, a good PR response in the early stages of the rare earths, World Trade Organisation dispute with America, the EU and Japan, now just starting exploratory discussions between the parties, as called for under the WTO rules.  Few if any, expect China to yield much ground. It also allowed China to try to take the high ground by stressing the need for an “environment-friendly” approach, subtly trying to morph the export regime dispute into an environmental dispute about the harm being done in China.

It will be interesting to see if any the complainant’s industrial behemoths jump at the chance of teaming up with Chinese firms. Short term it would appear to make little sense, China gains new technology while the firm takes all the risk. Longer term though, it might make sense. As Apples i-Phone sales just demonstrated, China is a big growth market for decades to come. However, until and how the British murder scandal rocking China gets resolved, China might find it a little harder to attract intellectual property investment.

Still to this old Scot the tale of the spider and the fly comes to mind.

April 25, 2012, 10:21 a.m. ET
China Reaches Out to Its Adversaries Over Rare Earths
BEIJING—China extended what it may have intended as an olive branch to the U.S., Japan and Europe in their dispute over rare earths even as it defended its export controls.

China’s Ministry of Industry and Information Technology on Wednesday invited foreign companies to team up with local firms on rare-earth technology ventures, particularly on environment-friendly projects.

“The U.S.’s, Japan’s and Europe’s [capabilities] in environmental management, recycling, technology research and development of high-end applications are welcome in China,” ministry spokesman Zhu Hongren told an online news conference.

China controls nearly all of the world’s production of rare earths—a group of 17 minerals with high-tech uses ranging from personal computers to advanced weaponry—but hopes to move up the value chain to become a manufacturer of rare-earth-based products as well as supplier of the minerals.

As part of that strategy it has repeatedly invited foreign companies to work on China-based rare-earth joint ventures, both to bolster its own technological capabilities and address foreign complaints over its rare-earth quotas. But the latest gesture’s emphasis on environment technologies and the singling out of the U.S., the European Union and Japan—which last month filed a rare-earth action before the World Trade Organization—as potential collaborators appeared to be an effort at least partly intended to address the WTO complaint.

“Will you walk into my parlor?” said the spider to the fly;
“‘Tis the prettiest little parlor that ever you may spy.
The way into my parlor is up a winding stair,
And I have many curious things to show when you are there.”
“Oh no, no,” said the little fly; “to ask me is in vain,
For who goes up your winding stair can ne’er come down again.”