Having recently commented on the appeal of investing in depressed European countries, an article in the New York Times caught our attention. This article discusses how, recently, the appeals panel of the World Trade Organization (WTO) ruled that China has to eliminate its export taxes and quotas on nine widely-used minerals. This decision was made in response to a case filed in 2009 against China by the US, the European Union, and Mexico, which alleged that China's export restrictions went against its agreement with the WTO when it joined in 2001. This decision is interesting in that it removes much of the motivation for companies to set up manufacturing facilities in China and helps to level the playing field for companies manufacturing in other countries the cost of their raw materials will no longer be way higher.
For medtech, this particular decision won't have a large effect just yet what medtech companies are really interested in is the status of export restrictions on rare earth metals, which are used in many electronic devices. Because over 90% of the world's rare earths are produced in China, a similar decision removing export taxes and quotas would lower production costs significantly, having a major impact on medtech and other technology manufacturers. And it's very possible that the restrictions on rare earths will be lifted in the near future the decision on the industrial raw materials is likely to set a precedent. This could potentially be great news for smaller manufacturers that lack the resources to set up manufacturing facilities in China.
Just how China will react to the WTO's ruling which is politically unpalatable in China because it favors. Western interests remains unclear. Although China has indicated that it will accept the ruling, the country may delay the elimination of the taxes, use its economic clout to penalize manufacturers that reduce the scale of their expansion in China, or develop new incentives to attract foreign companies to its rapidly developing markets. In any event, this will be something for medtech manufacturers to watch.