As the United States Continues Its Rapid Eye Movement Sleep, China’s Government Monopolized the Rare Earths Production Necessary to American Economic and Military Survival

18 October 2010

We ceded rare earths mining and processing to China

China has developed a virtual monopoly on the rare earth elements production that is required for modern technological infrastructures.

(Another table of these elements is here.)

Our cultural complacence has allowed China to:

(a) take our rare earths productive capacity away from us

and

(b) use its newly created monopoly on them to threaten Japan and anyone else who gets in China’s way.

We have been too geopolitically comatose to recognize that we are soon going to join Japan on China’s list of international victims.

Why are rare earths important?

Rare earths are used to make iPhones, Blackberries, and:

Rechargeable batteries for electric and hybrid cars, advanced ceramics, magnets for electric car motors, computers, DVD players, wind turbines, catalysts in cars and oil refineries, computer monitors, televisions, lighting, lasers, fiber optics, glass polishing, superconductors, and weapons.

FACTBOX ─ What are rare earth elements?, Reuters (09 September 2010)

How did the United States get itself into this bad position?

In the 1980s, before the electronics era, annual rare earths production amounted to less than $100 million.

That's why, when China ramped up its efforts to control the industry, other countries happily ceded the market.

[N]o one paid much attention until last year, when prices really started to soar.

Yet for the past five year China has been quietly imposing OPEC-style quotas, cutting exports by 5% to10% each year, and pushing up prices. In 2009 an index holding shares of 12 rare-earth miners rose by more than 600%. Countries like Japan, which depend on rare-earth imports in order to produce electronics, have been the hardest hit.

Perhaps the most troubling part of this story is that building a new rare-earth supply chain outside of China would probably take the better part of a decade, if not more. The infrastructure takes years to build -- many experts say between seven and 12 years -- and billions of dollars.

If we get any passively dumber, we’ll be waking up with non-Americans running the country

Yesterday, economist Paul Krugman pointed out that China had captured 97 percent of the market in rare earths production.

The Chinese government used that monopoly to (illegally) make Japan back down in Japan’s defense of its alleged territorial waters against a Chinese fishing trawler.

Professor Krugman concluded that:

China has about a third of the world’s rare earth deposits. This relative abundance, combined with low extraction and processing costs — reflecting both low wages and weak environmental standards — allowed China’s producers to undercut the U.S. industry.

You really have to wonder why nobody raised an alarm while this was happening, if only on national security grounds. But policy makers simply stood by as the U.S. rare earth industry shut down. In at least one case, in 2003 . . . . the Chinese literally packed up all the equipment in a U.S. production facility and shipped it to China.

What would you call our complacence, when our economy and national security are at stake?

Is this the free market operating?

Or is it more accurately called American suicide?

If we get any dumber, we will be waking up with non-Americans running the country

I have previously addressed how we have been asleep (a) in investing in the future and (b) in allowing China to steal American jobs.

Both trends imperil our economy and our ability to project military force.

One might be able to temporarily forgive this cultural laxity, given America’s uncritically amorous respect for the allegedly free market. We could (self-indulgently) argue that waking up to Reality takes a while.

But this is certainly not the case when we voluntarily give our adversary the very “weapon” we might need to defend ourselves in the future.

That’s worse than dumb.

It’s militarily and economically criminal.

Additional Citations

Factbox ─ What are rare earth elements?, Reuters (09 September 2010)

Jeremy Hsu, What Are Rare Earth Elements?, LiveScience (14 June 2010)

PeteFree.com

As the United States Continues Its Rapid Eye Movement Sleep, China’s Government Monopolized the Rare Earths Production Necessary to American Economic and Military Survival