China is a major global producer of many raw materials, and, in some cases, a dominant producer. Particular concern has been raised in the United States and elsewhere over China's near-monopoly in the production of "rare earths"—a group of 17 elements whose unique properties make them critical in a variety of advanced technologies. Due to their special properties of magnetism, luminescence, and strength, rare earths are widely used in high-technology and clean energy products, as well as in military weapon systems. According to one analyst, rare earth elements "are critical to hundreds of high tech applications, many of which define our modern way of life. Without rare earth elements, much of the world's modern technology would be vastly different, and many applications would not be possible." The Chinese government has made the development of its rare earth resources a top priority since the 1980s. In 1992, Chinese leader Deng Xiaoping reportedly said, "China's rare earth resources can be likened in importance to the Middle East's oil. They have immense strategic significance and we must certainly deal with rare earths issues with care, unleashing the advantages they bring." In 1999, Chinese President Jiang Zemin reportedly wrote: "Improve the development and applications of rare earth, and change the resource advantage into economic superiority." Government support for the rare earth industry, low labor costs, and lax environmental standards enabled China to become the world's dominant producer of rare earths, estimated to be the source of over 97% of the global supply. In recent years, China has been restructuring its domestic rare earth industry while putting more restrictions on rare earth exports, which has greatly affected the price and quantity of rare earths available in the global market. This has caused concern among businesses and foreign governments about potential business risks and geopolitical implications. Such concerns became more acute when China reportedly suspended shipments of rare earths to Japan, due to a months-long diplomatic crisis with Japan in September of 2010. China's rare earth policies have raised concerns among many in Congress because rare earths are important to a number of U.S. industries, including high technology (such as advanced electronics and medical equipment) and green technology (such as hybrid cars and wind turbines). In addition, U.S. defense industries rely on rare earths for a variety of weapon systems. China's export restrictions over the past two years have disrupted supplies and sharply raised prices for rare earths outside China. Some Members contend that China's export restrictions on rare earths are intended to give domestic Chinese downstream users a competitive advantage (because of the secured access to rare earth supply and the significant disparity between domestic and external rare earth prices) over foreign competitors, and/or to induce foreign users of rare earths to move their production facilities to China. Members have also expressed concerns that China's virtual monopoly of rare earths may impact U.S. economic and security interests because it makes many U.S. commercial and defense industries vulnerable to supply shortages and higher prices as a result of future Chinese restrictions that could occur for economic, as well as political, reasons. Several bills have been introduced in Congress to address these concerns, including H.R. 618 , H.R. 952 , H.R. 1314 , H.R. 1388 , H.R. 1540 , H.R. 2011 , H.R. 2184 , H.R. 2284 , S. 1113 , and S. 1270 . In the House, a congressional caucus on rare earths was established in late 2011 to push for reestablishing a domestic rare earth supply chain in order to reduce U.S. dependence on China. This report provides an overview of the U.S. dispute with China over its restrictions of rare earth exports. It examines the level of U.S. rare earth trade with China, how Chinese policies have affected rare earth prices for U.S. firms, possible motivations behind China's restrictions of rare earth exports, and how the United States and other major users of rare earths have responded, including a WTO dispute settlement case brought by the United States, Japan, and the EU in March 2012 against China over its rare earths restrictions. In addition, the report also examines China's rare earth industry and government policies—their evolution, recent developments, and effectiveness in meeting the government's goals (such as consolidating production, addressing pollution, and halting illegal mining). This report does not provide extensive discussion of rare earths from a resource supply chain perspective, nor from a national defense angle. For additional information on these topics, see CRS Report R41347, Rare Earth Elements: The Global Supply Chain , by [author name scrubbed]; and CRS Report R41744, Rare Earth Elements in National Defense: Background, Oversight Issues, and Options for Congress , by [author name scrubbed]. Contrary to the name, rare earths are not "rare." Rather, they are relatively abundant in the earth's crust. At the same time, however, they are highly scattered and are usually found mixed together in other deposits, which makes it difficult to find rare earths in a concentration high enough to be mined and separated economically. When rare earths are extracted from the mine, the ore containing the rare earths must go through complex separation processes to produce each individual element. It is the separation process that largely drives the cost of rare earth production. The 17 rare earth elements are often divided into two groups: light and heavy rare earth elements. Two of the largest rare earth mines outside China, namely, Mountain Pass in the United States and Mount Weld in Australia, contain mainly light rare earths. Many electronic products require heavy rare earths to perform more efficiently. Currently, China is the only country that can supply a significant amount of both light and heavy rare earths, and is likely to remain the major supplier of heavy rare earths in the near future. Rare earth deposits often contain radioactive elements, which means separating the metals requires costly and strenuous processes that produce a number of toxic pollutants and hazardous waste material. When the Mountain Pass mine in the United States was operating at full capacity in the 1990s, it produced as much as 850 gallons of salty wastewater per minute, which also contained radioactive thorium and uranium. The hazardous materials built up as scale inside the pipe that delivered the wastewater to evaporation ponds 11 miles away. Several times in the 1990s, cleaning operations caused the pipeline to burst, spilling hazardous waste into the desert. Molycorp, then a unit of the oil company Unocal, was ordered by the state of California to clean up the waste. In 2002, the already struggling Molycorp ran out of space to store its waste and failed to secure a permit to build a new storage facility. As a result, the mine shut down. Chevron's acquisition of Unocal in 2005 and other developments will be discussed later in this report. The list of rare earth applications is extensive and these applications can be found in many industries. Rare earths are used in petroleum refining and as diesel additives in the oil industry; they are important to the automotive industry because of their wide application in catalytic converters, hybrid vehicle batteries, motors, and generators; they are used by the electronics industry to make hard disk drives and cell phones; and they are used in powerful magnets in wind turbines (see Figure 1 ). While rare earth applications in high-tech have existed for decades, it is their application in clean energy technologies and defense systems that has brought global attention to rare earths. Rare earth metals' super magnetic strength allows for extraordinary miniaturization of components, which have important military applications. For example, the fins that steer precision bombs have samarium-cobalt permanent magnet motors; the solid-state lasers used to designate targets use neodymium. China has become the world's dominant producer, user, and exporter of rare earth elements. China's trade data indicate that the value of its rare earth exports in 2011 was $3.4 billion. According to the U.S. Geological Survey (USGS), China currently accounts for an estimated 97.3% of global mine production of rare earth elements (compared to 27% in 1990). The United States, like many other countries, has become dependent on China for rare earth materials, from oxides, metals, and alloys to permanent magnets and finished products, as illustrated by the following data and figures: As indicated in Figure 2 , Japan was by far China's largest export market for rare earth exports in 2011 (according to Chinese trade data), based on value (at 66% of total), followed by the United States (7%), France (6%), Germany (5%), Hong Kong (4%), and South Korea (3%). According to the U.S. International Trade Commission (USITC), the value of U.S. rare earth imports from the world totaled $860 million in 2011, up from $94 million in 2002, an 815% increase (see Figure 3 ). The value of U.S. rare earth imports from China in 2011 was $523 million, which was 0.13% of total U.S. imports from China. From 2002 to 2011, the value of U.S. rare earth imports from China rose by 1,376%. From 2010 to 2011, the value of U.S. rare earth imports from China increased by 305%. The U.S. dependence on China for its rare earth imports is significant when measured by quantity (i.e., kilograms or metric tons). From 2002 to 2011, the quantity of U.S. rare earth imports from China as a percent of total U.S. rare earth imports averaged 78.3%. The share of U.S. rare earth imports from China fell from 79.1% in 2010 to 53.5% in 2011.