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Danger to U.S. Defense Industry: China’s Monopoly Control of Rare Earths

“Rare earths” refer to seventeen metals found on the periodic table of elements that are important ingredients in some of the most advanced and desired consumer technologies, including cell phones, motors for hybrid vehicles, LED lights, and solar panels. Even more importantly, they are also crucial to national defense being necessary elements in advanced defense systems, weapons, and other technologies such as “smart bombs” that use magnets formulated with rare earth metals to control their direction and lasers with rare earth components that determine the distance of long-range enemy targets. China is the world’s largest producer of rare earth minerals producing 95 percent of the world’s supply. Over the past few years, China has been imposing strict export controls thereby reducing the amount of rare earths available around the world as well as keeping the price artificially high. On March 13, 2012, as a result of these practices, the United States, Japan, and the European Union filed a World Trade Organization complaint against China.

Mere weeks prior to the WTO complaint, President Obama signed an Executive Order creating the Interagency Trade Enforcement Center designed to “coordinate matters relating to enforcement of U.S. trade rights under international trade agreements and enforcement of domestic trade laws among USTR and [several government departments].” According to a Press Release issued in March 2012 by the Office of the United States Trade Representative, the launch of the case against China in combination with the creation of this new Center “reflects the Obama administration’s commitment to make all of our trading partners play by the rules.” The effectiveness of the agency remains to be seen over time. However, the issue is clearly pressing: according to The National Geographic (citing U.S. Geological Survey figures), last year 90 percent of U.S. imports for rare-earth minerals were from China, but this year that figured has increased to 97 percent. During the years of 2007-2010, the U.S. Geological Survey cites in its 2012 Report on Rare Earths that China supplied 79 percent of all imported “rare earths, compounds, etc.” in the U.S. Furthermore, the only domestic mine for rare earths closed in 2002 due primarily to environmental and economic concerns. In 2008, the mine was acquired by Molycorp Minerals LLC, which has since spent over $400,000 lobbying Congress on rare earth minerals in the hopes of modernizing and expanding the mine to restart production with federal financial assistance.

Legislation on the issue of spurring domestic rare earth investment and initiatives has already been proposed and, given the March 2012, U.S.-backed complaint to the WTO, the issue seems to be one poised for lots of legislative attention in the near future. An example of recent legislation includes Congressman Mike Coffman’s proposal last year, a bill dubbed the “RESTART Act,” which would create a domestic rare earth supply chain. Provisions of the bill include expediting the permit process to avoid lengthy bureaucratic delays while still complying with environmental laws, making loans backed by the government if the private capital market is unavailable, and establishing a rare earth program at the U.S. Geological Survey. Critics of this legislative effort and potentially other efforts say that China has more to lose by totally curbing exports to the U.S. Even provided it were so, Congress should still seriously consider the prongs of the RESTART Act and generally the issue of incentivizing domestic mining. Alternatively, it could consider giving federal assistance to companies that endeavor to harvest the small amount of rare earths within cell phones and hybrid car batteries for a more “eco-friendly” supply. Dependence on the “one-nation OPEC,” as Senator Lisa Murkowski of Alaska has compared China, is not only very disadvantageous to national security interests but also dangerous, and despite scientists’ efforts to find rare earth substitutes a certain lag time exists, assuming they even can be substituted in all applications. Congress must address these concerns. We need not return to a stockpiling program, as was prevalent in the Cold War, but providing incentives for extracting or recycling rare earths domestically is an initiative that should receive serious and prompt consideration to ensure our defense industry’s independence.


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