What on earth are we doing?
What we should
For over two decades, US government regulatory and tax policy have effectively shut down both mining and manufacturing on US soil, so that US companies cannot make a profit unless they outsource and offshore more and more of their operations. Thus, we have foolishly let ourselves become dependent on strategic rare earth minerals imported from China. We have been squandering our declining tax revenues on the “green industry” stimulus boondoggle, whose payback thus far has been negative. We have been making up the revenue shortfall by borrowing ever-growing sums of money from the Chinese. As Mark Steyn points out, the US owes not only more than it can pay back, it owes more than the entire planet can pay back. When the Chinese government puts a cap on rare earth mineral exports, the Obama Administration decides it’s time to put pressure on China, not that we are in much of a position to do so.
I am not the only one who sees a problem with that.
From the 1389 Blog Mailbox:
Since you occasionally cover resource-related and regulatory issues on your blog and recently covered one of our key issues, I thought your readers might appreciate some insight into the nightmare that is the U.S. permitting process for mining projects, to which Dan McGroarty alludes in his latest column for RealClearWorld.
How does the Jason Bourne reference fit in? In The Bourne Dominion, the latest installment of the book series, terrorists set out to destroy the only rare earths mine in the United States. If successful, China would be able to extend its dominion over resources critical to everything from wind power and electric car batteries to U.S. advanced weapons systems. Enter Jason Bourne to avert this threat.
McGroarty’s point is that in spite of an overall well-thought out scenario, this plot “simply isn’t credible,” as it’s far simpler to derail a major U.S. mining project:
[A]ny group opposed to U.S. interests would simply need an anti-mining activist, a Wi-Fi connection and the email addresses of a few federal, state and local bureaucrats. A thousand Jason Bournes with arms-linked around the mine pit would be no match for a well-aimed question about an errant comma on page 15 of Appendix D-3 of any one of the scores of permitting documents required to bring a modern mine online in the U.S. today.
Indeed, as we have regularly pointed out on our blog, the United States has the “dubious honor of being tied with Papua New Guinea for having the lengthiest permitting process of the 25 major mining nations,” according to the authoritative Behre Dolbear “Country Rankings for Mining Investment” report, also dubbed “Where not to Invest.” McGroarty’s conclusion is sobering:
In our world, as in Bourne’s, other countries step in to seize advantage when and where they can.
Unless we streamline a process perennially judged to be the mining world’s worst, the U.S. will be begging or buying critical metals of all kinds from whatever countries continue to mine them, using whatever standards – or lack thereof – to pull them out of the ground.
A book in which policymakers in Washington take on the U.S. mining permitting process, and make it more competitive without sacrificing necessary standards would likely collect dust on the shelves, and never make it to Hollywood. However, we’d all benefit from a plot like that.
Please help us spread the word by sharing this important issue with your readers, and feel free to contact me with any questions you may have.
Thank you, and best regards,
WASHINGTON – The Obama administration is bringing a new trade case against China that seeks to pressure Beijing to end export restrictions on key materials used to manufacture hybrid car batteries, flat-screen televisions and other high-tech goods.
The latest action, announced Tuesday, is part of President Barack Obama’s broader effort to crack down on what his administration sees as unfair trading practices by a rising economic power that have put American companies at a competitive disadvantage.
The U.S. asked the World Trade Organization to facilitate talks with China over its curtailment of exports of rare earth minerals. The U.S. is bringing the case to the WTO along with the European Union and Japan.
In Brussels, EU Trade Commissioner Karel De Gucht said China’s restrictions “hurt our producers and consumers in the EU and across the world.”
China has a stranglehold on the global supply of 17 rare earth minerals that are essential for making high-tech goods, including hybrid cars, weapons, flat-screen TVs, mobile phones, mercury-vapor lights, smartphones and camera lenses. The materials also are used in the manufacture of tiny motors, such as those used to raise and lower car windows and in consumer electronics.
China has reduced its export quotas of these rare earth minerals over the past several years to cope with growing demand at home, though Chinese officials also cite environmental concerns as the reason for the restrictions. U.S. industry officials suggest it is an unfair trade practice, against rules established by the WTO, a group that includes China as a member.
Administration officials said Beijing’s export restrictions give Chinese companies a competitive advantage by providing them access to more of these rare materials at a cheaper price, while forcing U.S. companies to manage with a smaller, more costly supply.
On Tuesday, a Chinese foreign ministry spokesman defended Beijing’s curbs on rare earth production as necessary to limit environmental damage and conserve scarce resources.
“We think the policy is in line with WTO rules,” said the spokesman, Liu Weimin, at a regular briefing.
He rejected complaints that China is limiting exports. “Exports have been stable. China will continue to export, and will manage rare earths based on WTO rules,” Liu said.
The spokesman noted that China has about 35 percent of rare earth deposits but accounts for more than 90 percent of global production. “China hopes other countries can shoulder responsibility for supplies and can find alternative resources,” he said.
Rare earth minerals are scattered throughout the Earth’s crust, but only in small quantities, making them hard to mine. However, rich deposits of these rare earth oxides are in China, giving it command of the market.
The U.S. has just one rare earth mining company, the Colorado-based Molycorp Inc. There are also working mines in Australia, and a proposed one in Malaysia.
The president used an executive order last month to create a new trade enforcement agency — the Interagency Trade Enforcement Center — to move aggressively against China and other nations. In announcing the new agency, Obama said it would bring “the full resources of the federal government to bear” in order to level the playing field for U.S. workers.
Under the terms of the WTO complaint, China has 10 days to respond and must hold talks with the U.S., E.U. and Japan within 60 days. If an agreement cannot be reached within that time frame, the U.S. and its partners could request a formal WTO panel to investigate Chinese practices.