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Competing with China in the Rare Earth Elements Market

Competing with China in the Rare Earth Elements Market

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Back in 2011 ASP published a report on the national security challenges derived from a dependence on the importation of rare earth elements (REEs) from China.

Almost a decade later REEs are back in the news as the US Army announced in November 2019 that it would fund a rare earths plant for weapon development. The Army “plans to fund construction of rare earths processing facilities, part of an urgent push by Washington to secure domestic supply of the minerals used to make military weapons and electronics,” according to government documents.

While the connection between the bottom of the periodic table and economic competitiveness and national security might not be obvious, REEs play a critical role in both.

 

REEs & Economic Competitiveness

Competing with China in the REE market is important to economic and national security as the US shifts its defense policy priorities back to great power competition. The 2018 National Defense Strategy identifies China as a “strategic competitor using predatory economics to intimidate its neighbors.” A US investment in domestic REE production will allow Washington to become a player in the world REE market, or at the very least reduce reliance on Chinese imports.

Despite President Trump recently signing a trade deal with China that cools the tensions between the world’s two economic powers, the move to increase domestic REE production will put the US in a much improved economic position for years to come.

In 2011, China owned 97% of the global REE market, but by 2018 China’s share of global REE production had dropped  down to 70% of total REEs. Despite a drop in China’s global share of REE production the US is still heavily reliant on Chinese REE imports. In 2018 the US imported $160 million worth of REEs, 80% of which came from China.

Investing in domestic REE production is significant in the context of larger economic relations with China as Washington has been in a long –  and highly public –  trade war with Beijing – a trade war that included threats from China to cut off REE exports to the US.  While domestic mining capabilities may not help in the short term, over the long run investment in REE mining in the US can help lower dependency on Chinese markets.

 

REEs & National Security

REEs play an important role in US national security as they are crucial to the production of key military equipment and maintaining military and economic competitiveness. REEs are included in:

  • Guidance and control systems, including the tomahawk cruise missile and Predator unmanned aircraft
  • Electronic warfare defenses, such as area denial systems and jamming devices
  • Targeting and weapons systems, including laser targeting
  • Communications equipment, such as sonar transducers and radar
  • Electric motors

Domestic production of REEs will bolster national security by ensuring the US will have access to the REEs vital for the production of military equipment.

In addition, a strong US economy remains critical to maintaining both economic and military superiority. As the tools of conflict have changed, gray-zone options – like economic sanctions and economic warfare – have become more important than ever, especially as the public appetite for military operations is quite low after almost two decades of conflict in the Middle East and South Asia.

 

Conclusion

Access to REEs are vital for US economic competitiveness and national security. US investment in domestic production of REEs should help lower dependence on Chinese exports of REEs, ensure the US has access to the REEs vital for military equipment, and allow the US to more effectively compete with China on the world stage, which is especially important as the Pentagon shifts its focus to great power competition.

 

 

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