China’s Stranglehold on Rare Earth Elements
& Why Congress Can’t Fight Back
Commentary by Lynn Koca,l Prairie Advocate
Last week, I finally got time to watch the hearing on examining the dire consequences of China’s monopoly on rare earth materials for U.S. manufacturing by House Foreign Affairs Subcommittee on Asia & the Pacific chaired by Congressman Don Manzullo (R-16th). Surprisingly, I wasn’t bored to tears, though I must admit that I did nod off for a few minutes during the two hour hearing. This one fact grabbed my attention: within the last year, China has raised the price of rare earth metals up to 1340%.
Following is Congressman Manzullo’s opening statement.
“In September 2010, the People’s Republic of China shocked the world by halting critical rare earth mineral exports in retaliation to a territorial dispute with Japan in the East China Sea. The Chinese action sent a clear and unmistakable message to Japan and the rest of the world: China is willing to use economic tools to achieve diplomatic goals. Two months later, when the export ban was lifted, price of cerium soared from approximately $5 per kilogram before the ban to $67 per kilogram after the ban. The price of neodymium went from $42 per kilo in April 2010 to $142 per kilo three months after the ban, and the price of dysprosium nearly doubled from $250 per kilo to $400 per kilo in January 2011.
“Today’s hearing about rare earth minerals is both timely and important given the vital role that these elements play in America’s manufacturing and defense industrial base. Rare earths are vital in a variety of manufactured goods, such as fluorescent lights, hybrid engines, wind turbines, and neodymium iron boron permanent magnets used in defense systems. China’s actions against Japan fundamentally transformed the rare earths market for the worse. As a result, manufacturers can no longer expect a steady supply of these elements, and the pricing uncertainty created by this action threatens tens of thousands of American jobs. For American’s defense industry, a total reliance on China for rare earths represents a serious weakness for national security.
“China currently controls 97 percent of the world’s rare earth production, including all stages of the supply chain for permanent magnets. China’s ability to dictate market terms to the rest of the world is particularly worrisome given its unwillingness to follow established international trade rules. To make matters worse, China is determined to retain much of the rare earth minerals it produces to meet growing domestic demand. Thus, American manufacturers are locked into a no-win scenario where the world’s sole supplier of rare earths is tightly controlling global supply. In fact, domestic Chinese demand is projected to consume nearly all the rare earth it produces, leaving nothing for the export markets.
“From the 1960s to the 1980s, the U.S. was the global leader in production, research and development, and fabrication of rare earth elements and magnets. During this period, however, Chinese leaders strategically targeted the rare earth industry for export to China. Well, they succeeded. By using a combination of low labor cost and non-existent environmental standards, China gradually transferred the entire American rare earth industry overseas. In 2002, the sole remaining American producer of neodymium iron boron magnets, Magnequench, located in Indiana, was sold to the Chinese with full approval from the Committee on Foreign Investment in the United States (CFIUS). This was the last act in the American tragedy; with the sale of Magnequench, crucial American intellectual property was forever transferred to China. This is where we are today, and if not for entrepreneurs like Molycorp, we would never end our dependence on China for rare earths. That’s why we are holding this hearing.
“After China’s two month rare earth mineral export embargo concluded in November 2010, the market price of certain rare earths, particularly cerium, neodymium, and dysprosium, soared to new highs. Currently, the prices for these elements are at astronomical levels, in some cases 650 percent over pre-export ban prices. As a result of this unprecedented supply disruption, the Japanese manufacturing industry implemented efforts to stockpile rare earths and to begin development of alternative technologies. In the U.S., there is barely any awareness of the seriousness of the crisis; however, to their credit, the Department of Energy (ARPA-E) is conducting cutting edge research into rare earth alternatives.
“Unfortunately, the scope of the crisis is enormous and only a concerted national effort will lead us out of this mess.
“The 16th Congressional District of Illinois, which I have the honor of representing, depends heavily on manufacturing for its livelihood. Manufacturing accounts for approximately 25 percent of the local economy or double the national average. Manufacturers in Illinois and nationwide are extremely concerned about China’s monopoly on rare earths, and we need to heed their urgent call to action. Thus, I call on the Administration to work with Congress to formulate a coherent, common sense approach to ending China’s monopoly on rare earths. This isn’t a Republican or a Democrat issue. It is an American issue that requires bipartisan leadership.
“I have met at length with industry representatives and officials from the Departments of Energy and State to try to gain a better understanding of the magnitude of this crisis. I cosponsored legislation authored by Representative Mike Coffman of Colorado to streamline the process for domestic rare earth production, and I recently urged U.S. Trade Representative Ron Kirk to take action at the World Trade Organization against China’s unfair export practices.”
You can watch the hearing by CLICKING HERE:
I was determined to get through the hearing because it was shocking to read the news release that China now controls 95% of the rare-earth metal mining in the world even though China has 35% of the world’s reserves.
What significance do these rare metals have in your life? How about your laptop screen, cell phone, hard drives and other gadgets on which you depend, or making motors run more efficiently. Did you know a rare earth metal works as a magnet and levitates a shaft so it never needs oil and doesn’t have the friction usually found in motors? I certainly had no idea how we all depend on rare earth metals.
I also researched on the the US Geological Survey web site and found that the U.S. has abundant supplies of rare earth metals.
Especially shocking was the fact that the last remaining rare earth mine in the U.S. was purchased by the Chinese government in 2002. President George W. Bush and our Congress allowed this to happen. It’s located in Indiana, and perhaps the State of Indiana should consider some stringent regulations to shut that mine down.
Some good news is that a mine is opening in California that will produce rare earth metals more efficiently and thus more economically than China can. We can hope that it will soon open and begin supplying American manufacturers, allowing the return of jobs lost to China because of the strangle-hold.
Presently the EPA is not harassing them, though we know that things can always change under the current administration.
Right now, American companies are being pressured by China to send the remaining jobs from the U.S. to China with the bribe that the metals will be sold much more cheaply if they do so. This will eventually affect hundreds of thousands of workers in the U.S. because they make products with parts made by other companies. It is certain that China will also pressure them, as they have done to others so many times.
Here is testimony that nearly knocked me over: Congressman Sherman representing the San Fernando Valley in California (D-27th District) said, “The fact that China has a monopoly in this area is not an act of God. God in His wisdom put two-thirds of the rare-earth elements outside of China. It is a result of China’s unfair trade practices. Not only the cheap labor and the nonexistent environmental standards that the Chairman referred to, but the fact that China subsidizes this industry under the table and they can afford to do so because of their other unfair trade practices.
“The underlying problem is that the most powerful interests in the United States benefit massively from Chinese unfair trade practices. They may not benefit with regard to rare earth elements, but the overall relationship with China means you make it for pennies, sell it for dollars in the United States, ship the jobs overseas and report high earning per share. And, Chinese control of rare earth elements gives them one more argument as to why we should kowtow to China.
“The solution is to end these practices, which is what a bill I proposed would do and force China to change all of its unfair policies under threat of a regime change under economic downturn. Now, the most powerful and rich in our society are not going to allow us to seriously consider that and the think-tanks they fund will disparage it. They won’t allow any fundamental change in our relationship with China and they will constantly tell us that earnings per share is the same thing as National economic health. In my district, there are four cable channels dedicated to the worship of Wall Street and earnings per share. There are only three channels dedicated to the worship of Jesus Christ.
“We will have a hearing on this unfair trade practice. We could have 999 other hearings on unfair trade practices. We will file something with the WTO. It will be meaningless. We may be able to deal with this one issue by subsidizing the industry if we have any money left over for that or restricting China’s exporting of rare earth elements which strikes me as unlikely.”
Who are the most powerful interests in the United States? Even though I would answer that it is the American citizens - the ones who purchase the products with dollars that are made for pennies - it seems Congressman Sherman believes they are multi-national corporation share-holders, not just the little people, but the big share-holders and the large multi-national banks that finance them with nearly zero interest loans.
You see, when the consumers here are in too much debt to buy their products, they will simply move on to greener pastures.
They are not inclined to be loyal to the United States or responsible to the citizens who have supported them. All that matters to them is that they increase profits at any expense. Before the turn of the last century, the Supreme Court made a misguided ruling that corporations could act as heartless, soulless individuals.
Now, we find ourselves in a terrible position, as Congressman Sherman puts it. We are suddenly not allowed by the powerful to have any say in what happens in our own country, where these corporations have acquired loop-holes to not even pay taxes in their country of origin. It seems pretty clear that our legislators have no power, either because some of them are bought off or blackmailed, or who knows what else? Most of us could probably go on and on about how the federal government is no longer within Congress’ or our control.
It’s a fallacy that we have no control even though many would like for us to think so. Every time you purchase products for dollars that are made with pennies, you are supporting these corporations and their use of slave labor in China. You are not only supporting them, but you are enabling the enslavement of millions of unfortunate people who have high rates of suicide from the unbearable conditions they must slave under. You are breathing the dirty air China sends over here. You are also probably sending your job overseas in the near future.
You can insist that the corporations you do business with are responsible to the citizens of the United States, or not do business with them. If everyone would just boycott Coca-Cola and its subsidiaries, their game would fall apart. Sometimes it isn’t easy to find things made in the U.S.A. Sometimes it’s just easier and better to do without than to support the robber-barons who will deprive our children and grandchildren of their right to a fruitful life of liberty.
I like Apple computers, but I’m going to tell them that recycling computers isn’t going to hack it with me. Until they decide to manufacture products in the U.S. and be responsible to the citizens in this country, I will do my utmost to do without their products. Well, maybe I’ll just buy Macs refurbished in the U.S.A.
We do have the power. It’s simply how we vote with our dollars. Quick and cheap now, so costly later is not the way. We will pay for it dearly if we don’t do the right thing now. We haven’t much time left.
But we have enough time before the 2012 election to state our case to Congress. Many are up for re-election. Ask them what they plan to do about this one, specific issue. Be proactive. Demand a full, transparent accounting of their assets and finances, not the one where myriad items can be omitted. Remind them who has the real power, and take action.
