All praise be to Allah, and may his peace and blessings be on the last and best prophet and messenger, Muhammad.
Before I answer your question about circumcision, let me first stress the following:
Female circumcision that our scholars talk about is different from the practice of some African communities (including Muslim) in which the female genitalia is mutilated.
Some extremists from the west and their devout followers in the Muslim world like to brand all circumcision as female genital mutilation (FGM). For those, we say, why is male circumcision not MGM? Male circumcision is widely practiced in the west. Yet it would be considered by the Chinese MGM (Male Genital Mutilation).
The benefits of male circumcision are beginning to be more recognized in the medical societies, even though still contested by a few. Fifty years ago, no one knew that male circumcision has medical benefits. The same could be true with female circumcision. They may figure out the benefits of the practice in fifty or five hundred years.
Some people are already recognizing some benefits in female circumcision (they call it clitoridectomy, which is not accurate). Catherine Blackedge, Science and Medical journalist with a focus on female sexology, .indicated that clitoridectomy can support gender identity in her book “The Story of V (Vagina) : A Natural History of Female Sexuality” Rutgers University Press, New Brunswick, NY.
The question is would the western universities be willing to conduct impartial studies to look for the possible benefits of female circumcision?
I believe that the part that needs to be removed in female circumcision is that which corresponds to the foreskin in the male, and that is called "the clitoral hood". It was noticed that the same harmful smegma that accumulates under the foreskin of male infants does accumulate under the clitoral hood of the female.
This quotation is from the online encyclopedia wikipedia:
" The outside portion of the clitoris, the clitoral glans, is entirely or partially covered by the clitoral hood or prepuce, tissue that is homologous to the foreskin in males and beneath which smegma is formed and may collect."
Now, the Islamic position:
In the hadeeth the Prophet advised removing a very slight portion of flesh, which is that clitoral hood. He forbade excising much and explained that it would be better for the husband that only a very small piece of flesh gets removed. This means that female circumcision in Islam is not even partial clitoridectomy, even though a very small portion of the clitoris may be removed in the procedure, but it is simply the removal of the clitoral hood.
The Prophet said to Oum-Atteyah (the female circumciser):
"اخفضي ولا تُنهكي فإنه أنضر للوجه, وأحظى عند الزوج"
"Cut but not excessively for this would be more conducive to brightness of the face and better for the husband." Narrated by Aldahhak ibn Qays and recorded by al-Hakim. Saheeh al-Jame` 336
As for the ruling, it is controversial, the majority of the scholars regard it mustahab (preferable sunnah), some regard it allowable and some consider it wajib (obligatory) because of the previous hadeeth.
The question is not to ban female circumcision because of the position of certain nations, but How do we regulate it as Muslims? Most of the problem and the bad publicity stem from the fact that, not infrequently, unqualified people perform the procedure and they may do more harm than good. If it was left to the specialists, it wouldn`t have been misused and wouldn`t have gotten such bad publicity. So, it is essential that the medical doctors be trained in the procedure and become the only ones permitted to do it. The surgeon will then judiciously remove what needs to be removed.
What should we -western Muslims- do? For Muslims who live in the west, since it is not mandatory and it is at the same time illegal in the west, and would bring about harm to the people who practice it, I wouldn`t advise having it done, as long as you are a resident/citizen of the west.
We however should never doubt anything in our religion because of the bad publicity the media creates about it. Would it have been sensible for Muslims fifty years ago to doubt male circumcision because it was not yet shown by science to be of benefit!?