China rare earth export curbs a ‘lose-lose’ for everyone, Spain economy minister says

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China’s new restrictions on rare earth exports amount to a “lose-lose scenario” for the entire world, Spain’s economy minister said Wednesday.

“We are very concerned because of the potential impact — let’s see how it actually materializes,” Carlos Cuerpo said at Semafor’s World Economy Summit in Washington, DC. “This is another fragmentation of international trade… That’s not the way that the EU wants to go.”

Beijing last week enacted new curbs on the sale of the valuable minerals, opening a new front in its trade war with the US. But the spat has implications for Europe, too, as the continent looks to boost domestic supply chains and reduce dependency on China.

Asked whether rare earths would be on the agenda during closed-door IMF and World Bank meetings and in talks with the White House this week, Cuerpo said: “The answer is a very short one: yes.”

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Spain finds itself in something of a unique position when it comes to China: While the US and European peers move to “de-risk” and heighten their scrutiny of Chinese investment, Madrid has been more open to boosting economic ties with Beijing. It has embraced Chinese tech, including Huawei systems.

Cuerpo made the case that Europe must “engage with Chinese authorities.”

“We have to understand that in many sectors, [China has] a huge technological advantage,” he said. “We need to attract investments to provide for this technological transfer that will close that technological gap” and create local jobs.

The issue of technology transfer is becoming a more pressing one in the EU: The bloc is considering rules that would require Chinese firms to hand over their technology to European firms if they want to operate in Europe, as Brussels struggles to make its industries more competitive.