Larry Bell has a good piece at Forbes.com on China’s monopoly power concerning rare-earth mineral. An excerpt:
China presently produces more than 95% of all rare earth materials that are vital in the creation of a big variety of electronic technologies including lithium car batteries, solar panels, wind turbines, flat-screen television, compact fluorescent light bulbs, petroleum-to-gasoline catalytic cracking, and military defense components such as missile guidance systems. It also dominates abilities to process them. This enables it to attract product manufactures to operate there as a condition of doing business, ration exports to maximize prices, and punish nations that don’t go along with its policy interests through supply embargoes. Beijing reduced rare earth shipments by 9% in 2010 over 2009, and has recently announced plans to reduce exports by another 35%.
China produces the vast majority of two particularly important rares, dysprosium (99 percent) and neodymium (95 percent). The motor of a Prius requires about 3 pounds of the latter. While other countries, including the U.S., have significant amounts of these, China’s low-cost labor and lax environmental restrictions has afforded it a big advantage in this mining-intensive industry.
Last year Congress required the Pentagon to examine the use of rare earth materials in defense applications to determine if non-U.S. supplies might be disrupted and identify ways to ensure adequate supplies by 2015. In response, the Pentagon sent back an unpublished report last month titled “Rare Earth Materials in Defense Applications” which concluded that the military is in pretty good general shape except for yttrium, an element used mostly in lasers. While China produced about 98% of the world’s yttrium in 2011, U.S. natural reserves of that material are about half as large.
Is it time to end that Chinese monopoly control of materials important to our military and to high-tech manufacturing? Following years of unsuccessful efforts, the Obama administration now appears to realize the importance of doing so, announcing on March 13 that it intends to press the World Trade Organization to force China to discontinue levying restrictions on rare earth exports. While WTO rules technically permit export quotas on natural resources for environmental purposes (which China claims to be the case in regard to rare earths), trade lawyers argue that China’s caps on its export violates that spirit. They note that while Beijing has been cutting access to these vital materials by other countries through quotas, it has been slow to limit rigid production limits at home that might help to protect the natural environment.
You can read the rest here, but focus on the last few sentences I’ve highlighted above.
Here’s the thing: rare earth minerals aren’t really rare, it’s just that the process to extract them from useless rock is expensive and destructive to the environment. The fact is, we don’t need China for our rare earth minerals, we just choose to buy from them because they really don’t care about carving up giant swaths of their country to mine them.
Team Obama’s argument before the WTO is quite paradoxical. They either want a) China to open up the market and continue to destroy their environment or b) China to stop destroying its environment to comply with the WTO, which would then limit the availability of the minerals.
We know the administration wants “a,” yet this goes against all of the other rhetoric we hear coming from Democrats on the importance of environmental issues in trade agreements. Even better, the U.S. needs these rare earth elements to make things like solar panels. We must destroy Gaia to save her?
The real problem here, as Lee points out in his Forbes piece, is that mining has become so costly in the United States that these jobs have moved overseas. Lee’s spot-on conclusion to this dilemma:
So where does all of this ultimately leave America’s electronics future? The good news is that our country is believed to have the world’s second most plentiful deposits of rare earth resources, and that use of alternative materials may eventually reduce demands even for these. On the other hand, a host of current government policies will likely continue to delay development and utilization of those mineral assets, and successful demonstration of alternatives remains theoretical and uncertain.
While as with energy resources we witness a familiar pattern here, perhaps there is a paradoxical new wrinkle. This time the issues directly pit anti-mining and anti-drilling agendas of environmental activists against their own companion goals to advance rare earth-dependent wind turbines, solar power, and more efficient electric vehicles.
Let’s get real, and acknowledge that the Chinese didn’t create our present rare earth challenges. We alone did through increasing dependence upon confused and conflicting government policies. It’s time to end this nonsense, and rediscover tried and true free market principles that will yield lasting solutions.