China Can Literally Pull the Plug on US High Tech Manufacturing and Defense Applications
Even in our hyper-partisan political times, here’s one thing we should all agree on: We shouldn't have to rely on any other country, and certainly not the Chinese Communist Party (CCP), for our critical defense applications, electric vehicles, and consumer technology such as medical technology, clean energy applications and the 5G network. Yet nearly every high-tech device not made in China that we proudly label “Made in the USA” – from fighter jets to cell phones to wind turbines – deserves another more dubious moniker, “Made with components imported from China.”
The U.S., the EU, Japan, Korea and all other countries where manufacturing is the backbone of their economies, are more dependent than ever on China for the importation of so-called rare earth elements; the technological building blocks needed to power electric vehicles, move us more towards a greener economy, activate touchscreens, and guide missiles. Meanwhile, China has repeatedly threatened to stop exporting those minerals. It should be noted that this is absolutely not about the “Trade War” or which political party or president is in power. This is about the “Made in China in 2025” and other initiative, as the CCP clearly intends to further solidify its position as the “superpower” of global manufacturing – an initiative that transcends any U.S. administration and its trade policies, thereby maintaining absolute control of the critical minerals supply chain as part of that mandate.
In 2010 when China entirely cut Japan off from rare earth exports as part of a dispute in the South China Sea, the US and Japan took its case to the World Trade Organization, and China was forced to resume exports to Japan. This time it is different. Because China now needs more rare earths than it can produce, withholding exports for internal use will not be regarded by the WTO as a breach of international trade laws. And in fact, China is now a net importer of rare earth materials from countries like Myanmar and are also seeking to invest in rare earth projects in Africa and other parts of the globe.
We must break free of our dependence on China as soon as possible. Doing so is going to take a broad bipartisan effort, and partnership between government and industry. It will also take collaboration between the US and other countries like Australia, Canada and India, where rare earth projects and processing capabilities are being developed.
The need is urgent. Critical minerals are the backbone of any economy reliant on manufacturing. Billions of dollars’ worth of rare earths translates into trillions of dollars of finished goods and hundreds of thousands of jobs. China has understood this for a long time, and as a result has solidified their stranglehold of the critical minerals supply chain.
There are several rare earth deposits located within U.S. borders, such as USA Rare Earth’s Round Top Project in Hudspeth County, Texas, that are brimming with these raw materials, in addition to the pilot plant being commissioned at our processing facility in Colorado. We have also acquired the NdFeB magnet plant formerly owned and operated by Hitachi in North Carolina. This is all essential to a domestic supply chain. However, no one project and no one company is going to end this dependance on China. Collaboration is required between the rare earth mining and processing companies themselves, as the demand for these materials will far outweigh what any one project will be able to provide. But, to succeed it is important that we approach this with a united front, with Government supporting the private sector which is investing in the critical minerals sector.
There’s another urgent reason to reduce our dependence on Chinese rare earths: China’s abysmal environmental track record when mining and processing these critical minerals. Even China itself has acknowledged that its mining and processing methods have had a devastating impact on nearby water bodies, towns and villages, with negative impacts on public health. In a terrible irony, many of these Chinese minerals end up in green energy applications like electric vehicles and wind turbines all over the world, including here in the U.S. Some leading large private-sector companies as well as governing bodies like the EU Commission, are taking note, and pledging to consider the source of their critical minerals. It is time for clean and green tech minerals to be produced using clean, green technologies and even energy.
To that end, we are seeing encouraging bipartisan efforts in both chambers of Congress to work with everyone from miners to processors to manufacturers to develop a completely U.S. based supply chain of these raw materials.
In May 2020, Senator Ted Cruz (R-TX) introduced the Onshoring Rare Earths (ORE) Act and recently Congressmen Lance Gooden (R-TX) and Vicente Gonzalez (D-TX), together with co-sponsors from both parties – introduced the Reclaiming American Rare Earths (RARE) Act. Both the House and Senate bill create comprehensive tax incentive and grant programs to encourage investment in and development of U.S.-based rare earth and critical mineral production, from mining, reclamation and recycling through processing and advanced materials production, as well as “secondary recovery” projects, recovering the materials from legacy mine waste and from eWaste recycling. The common thread: Encouraging U.S.-based projects so high-tech products can be manufactured with rare earths sourced, separated and processed into advanced materials right here in the U.S. – a complete end-to-end, “Made-in-America” supply chain.
We are not proposing subsidies to decrease the costs of production or manipulate prices, as the Chinese Communist Party has done, and we are not recommending “handouts” that would simply bolster the bottom lines of corporations. Rather, we need to cultivate an economic and policy environment that is favorable to robust domestic production of these resources.
By decreasing our dependence on China, we will strengthen our national security, spur American innovation, grow our economy, and ensure the U.S. has the resource independence required to cement our leadership in technologies that define the 21st century.
Pini Althaus is CEO of USA Rare Earth (www.usarareearth.com), the funder and operator of the Round Top Heavy Rare Earth and Critical Minerals Project in Hudspeth County, TX and a critical minerals processing plant in Wheat Ridge, CO.