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Bold Action Needed to Solve Rare Earth Problem

It happens about once a year here in Washington: a think tank or a group of concerned citizens holds an event centering on the rare earth problem.

Then a year passes, and another organization puts on a panel discussion or releases a report where it is revealed that not much has changed over the past 12 months.

For those unfamiliar with the problem, here is a summary: Rare earths are a category of strategic minerals that — despite the misnomer — aren’t all that rare. They are found in abundance here in the United States.

They are an essential building block in a variety of consumer and military technologies, including iPhones and Tomahawk missiles.

The problem is that the United States decades ago abandoned mining and producing rare earth elements for a variety of reasons.

Meanwhile, as technology advanced and rare earths became more and more essential to modern day life, China stepped into the vacuum and created a monopoly.

The monopoly extends not only to mining the elements, but more importantly to refining and processing them into the materials needed for a growing list of technologies.

For example, the United States government wants to get away from China’s dominance in the 5G telecommunications marketplace. It doesn’t trust the main purveyor of the technology: Huawei. And it’s actively pursuing policies aimed at discouraging U.S. companies and U.S. allies from depending on China for the next-generation wireless networks.

Unfortunately, experts say even if U.S. telecom giants were to develop their own indigenous 5G technology, they would still need to buy tons of processed rare earth material from China to make it work.

So? Start your own mining and processing facility and cash in on the demand. But be prepared for China to drastically push down the market price for the commodities in order to aggressively drive competitors out of the business.

This year’s discussion on rare earths — held virtually due to the COVID-19 crisis — was organized by the Center for Security Policy, a think tank founded by former Reagan administration officials.

Laid bare in the discussion was the usual political split. On the panel were former Republican Party officials, who wanted the government to help — a little bit, but not so much that it would make them uncomfortable.

“We’re good conservatives,” said Daniel McGroarty, a principal with the Carmot Strategic Group, and special assistant to the president for communications under President George H. W. Bush. The government shouldn’t be picking winners and losers, he said. “We don’t want that. We remember the Department of Energy. We remember the Obama years. We remember Solyndra,” he said, referencing the DoE program that loaned millions of dollars to the solar energy company, which ended up filing for bankruptcy.

“We don’t want to even up the asymmetric contest by nationalizing U.S. resources,” he said. If government can signal demand on what’s critical and important it can help “in some small way,” he said.

The United States shouldn’t take on China by being more “China-like,” he said. “We’re going to lose all the advantage that the U.S. system has.”

Investment should flow to the best possible candidates with the most innovative ideas, McGroarty said.

The invisible hand of the market and Adam Smith’s The Wealth of Nations came up in the discussion.

“Can government support this effort in some way without substituting its wisdom for the wisdom of the markets? That would be a bad plan,” McGroarty said.

The other side of the coin was Yechezkel Moskowitz, a fellow at the think tank and chief executive officer of Materia USA, a startup focused on production of critical mineral commodities from unconventional resources such as recycling.

There is no U.S. strategy presently available to secure rare earths, he pointed out. Both Presidents Barack Obama and Donald Trump issued executive orders on strategic minerals, but not much has come of them.

There were, however, some grants resulting from the Trump directives.

Moskowitz saw a bigger role for government. It should breathe life back into the now nearly defunct and defunded Bureau of Mines.

“It was the vehicle that kick-started the entire rare earth industry in this country. That was because it took all of the people who were experts in their field on the topics of rare earth and project development and procurement, and they basically gave them the keys to secure the interests for the United States and its national security during the Cold War,” Moskowitz said.

“In order to compete with the Chinese, we are going to have to provide economic incentives to do so,” he added.

While McGroarty asserted that “the environmentalists and super regulators want to come in and cripple us and benefit the Chinese,” Moskowitz pointed out that some Chinese communities near these mines have been turned into ecological disaster zones and are nearly uninhabitable.

With “healthy amounts of regulations, … you can still mine rare earths in the United States in an economically viable fashion,” he contended.

Two different approaches to the problem based on two different political philosophies is not surprising in Washington.

But it seems that bold action of some kind is now required on the part of Congress to jump-start a U.S. rare earths market. Sadly, the words “bold action” and “Congress” are not often spoken in the same sentence nowadays.

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