As the possibility of a full-blown trade war with China looms over the economy, it’s important to understand the pressure points that Beijing could push to exert leverage against the U.S. And the nation’s Achilles’ heel could very well be a complete dependence on China for a growing number of key minerals and metals.
If tit-for-tat tariffs don’t result in detente, Beijing could cripple America’s industrial supply chain by placing an embargo on minerals and metals exports, particularly rare earth minerals. It’s Beijing’s ace up the sleeve, and we gave it to them.
Despite an abundance of minerals reserves, America has become increasingly dependent on imports to meet demand. The U.S. Geological Survey reports that America is now 100 percent import-reliant for 21 minerals, and at least 50 percent import-reliant for another 29. Most troubling is that the U.S. is now 100 percent import-dependent for all of the 17 minerals that constitute the rare-earth minerals group. And China, which controls more than 95 percent of global rare-earth minerals production, has a monopoly.
Whether it’s cellphones, electric motors, batteries, aircraft, wind turbines or MRI machines, rare earths play an essential role. But it’s not just commercial manufacturing assembly lines that are vulnerable to an embargo; it’s also military hardware.
Whether it’s the advanced electronics and control systems in F-22 and F-35 aircraft, night vision devices, guidance, targeting systems, or dozens of other critical defense technologies, they’re all built with rare earth components. While the U.S. has a small strategic reserve of some of these minerals, to provide a short-term supply for our military supply chain, we have allowed ourselves to become unnervingly comfortable in China’s vise.
Just a few decades ago, the U.S. was the world’s largest rare earths producer. The erosion of our production and its shift to China is a complex story, but the common thread across our growing minerals-import dependence is a regulatory approach to mining that has seen investment flee despite world-class resources. For example, the U.S. possesses 13 percent of global rare-earth minerals reserves, with significant deposits in California, Alaska, Idaho, Montana and Missouri. Yet increased import reliance has become a national security issue.
Previewing the upcoming release of an interagency study on defense supply chain vulnerabilities commissioned in 2017 by President Donald Trump, Under Secretary of Defense for Acquisition and Sustainment Ellen Lord said: “What comes up and is quite alarming is we have an amazing amount of dependency on China. They are sole sources for rare earth minerals, some energetics, different things. This is a problem for us as we move forward.”
China has used its market dominance to manipulate the rare earths market before, and we can expect it to do so again. Since the 1990s, Chinese authorities have pursued an explicit policy of controlling a resource they consider “strategic and critical.” China’s manipulation of the global supply of rare earths received heightened attention in 2010, when China halted rare earths exports to Japan after a fishing dispute near a set of islands claimed by both countries. Moreover, China imposed export quotas on its rare earths production, temporarily sending global prices for rare earths skyrocketing. The crisis led then-Secretary of State Hillary Clinton to call our import dependence a “wake-up call.”
In the years following the 2010 crisis, competitors to China’s monopoly of the market made inroads, but China’s grip has since strengthened. As the Government Accountability Office reported in 2016, the Defense Department’s ability to respond to a potential supply disruption “may not be sufficient” despite being a “bedrock national security issue.”
To date, the policy approach to addressing the shortage of mineral production has been haphazard, unfocused and minimalist. The administration and Congress should leverage this moment to address such an important defense supply chain vulnerability.
Under consideration for inclusion in the National Defense Authorization Act is an amendment from Rep. Mark Amodei, R-Nev., that would bring commonsense reform to mine permitting, a critical step in encouraging U.S. mineral production and the rebuilding of a domestic supply chain. It deserves our full support.
Why mine permitting? The U.S. receives the lowest rating for a “mine-friendly” business environment from industry watchers. Our redundant, broken mine-permitting process exemplifies an increasingly adversarial approach to mining. It can take a decade or longer to gain the necessary permits to open a new mine. In Canada or Australia, nations with comparable environmental safeguards, mine permitting takes just two to three years.
We shouldn’t wait a minute longer to enact the commonsense mine-permitting reforms our defense supply chain so desperately needs. Whether or not China uses its mineral production dominance as a weapon, we should act to eliminate such vulnerability. Fortunately, America possesses vast mineral reserves that can reduce import dependence. U.S. industry, supported by the federal government as necessary, must collaborate to recapture a larger presence of the minerals’ mining industry. With national security at risk, the time for action is now.