In a new piece for Defense News, Jeffery A. Green, president of J. A. Green & Company and a member of the ARPN panel of experts, takes exception to a recent opinion piece by the Wall Street Journal’s editorial board on the current rare earth crisis.
The opinion piece had argued that the situation wasn’t as dire as many analysts and commentators made it out to be, and that markets alone could solve the issues surrounding China’s dominance. According to Green, this is not only a misguided position, it represents a “counternarrative” that has “stifled the development of a complete rare earth supply chain over the last decade, and will only scare and confuse the government and markets going forward.”
“Unfortunately, the editorial glosses over China’s ability to cut off supplies; provides misleading information on China’s current and future involvement in rare earth production; inappropriately argues the U.S. can meet its defense needs in the event of an embargo; offers a knee-jerk assessment of rare earth mining and processing as environmentally destructive; and ignores the national security implications of an entirely market-driven approach.”
Green outlines four areas in which he believes the WSJ Ed board misses the mark:
- 1. While the editors claim that China’s REE production is “on the wane,” the actual decline only amounts to a “small decline in their dominance of rare earth oxide production.” China continues to dominate — and in some cases is near a total production monopoly when it comes to “critical downstream capabilities required to bring products to market, such as rare earth metals, alloys and magnets.”
- 2. The U.S. cannot, in fact, meet all DoD rare earths needs in the event of supply chain disruptions, because “many key elements of U.S. defense systems rely on rare earth materials that are in short supply, or unavailable, outside of China.”
- 3. The editors suggest that domestic rare earth mining and processing would be harmful to the environment, but that idea is “misguided.” One must keep in mind that the U.S. is home to the “most highly regulated and environmentally friendly rare earth mine in the world” relying on technology and processes that could be “replicated as the domestic market expands.”
- 4. Previous attempts to let the market solve issues surrounding the rare earths supply chain have “failed miserably,” and wrongly assumed that Beijing would play by the rules governing a free and fair market system — an assumption that has been proven wrong.
Citing recent developments in Washington, DC, including President Biden’s recent executive order on securing critical supply chains and the House Armed Services Committee announcement of a bipartisan task force to investigate critical supply chains, Green says that it seems that fortunately, government has realized the need to act and invest.
Green closes in invoking noted 18th century economic theorist Adam Smith – dubbed the father of the free market by some – who noted that market rules don’t apply to national security. Smith was quite clear in his take that “it might not always be prudent to depend upon our neighbors for the supply.” The materials Smith referred to were certainly different at the time – sailcloth and gunpowder – but their strategic relevance at the time is comparable to the relevance of REEs today.
“[L]awmakers and members of the administration must not be fooled by an entirely free market approach that ignores forces larger and more powerful than the invisible hand. Meanwhile, China’s intention to achieve economic dominance across the globe will not cease or bend to market forces (see the Made in China 2025 initiative), which requires an explicit strategy to safeguard America’s interests.”
Read the WSJ Ed board’s original take here (subscription).
And for more on our nation’s REE conundrum, see here.