Now moving from rhetoric to reality, the Great Trade War of 2018 has kicked off a scramble for preferred commercial outcomes felt in the corridors of Congress and logged in White House phone calls.
Over the last months, U.S. manufacturers, the agricultural export lobby and primary commodity firms have moved into the trading trenches as reciprocal multibillion dollar tariffs begin to hit home. But lost in the uproar is a sense of the wider goals of this conflict.
Reciprocal trade “fairness” remains the dominant public rationale, but there are bigger fish to fry: a monopolistic mindset must come under sustained fire, especially China’s mercantilist, possessive and beggar-thy-neighbor industrial policy.
Yet while the U.S. administration has good reason to challenge China on the thrust of trading policy, tariffs invariably cause indiscriminate damage, doing little to derail or even moderate China’s advanced manufacturing and tech sector plans.
Lifting American competitiveness across the board is a more enduring goal that requires renewed attention to domestic impediments to competitive productivity, whether regulatory overload or infrastructure shortcomings.
In many respects, we have been our own enemy when one surveys eroding U.S. competitiveness and the steady diminution of our industrial and manufacturing sector. We have also acquiesced in the widening of glaring strategic vulnerabilities — notably the nearly complete American dependence on China’s rare earth minerals, a situation shaped in equal parts by China’s strategic mercantilism and by our own domestic policy.
It is not far-fetched to see in China’s monopoly of the global rare earth minerals market something like a “nuclear option,” employable as and when the trade tariffs conflict escalates further. Rare earth minerals (REM) have become critical to the production of such products as wind turbines and electric engines, and to dominant U.S. defense technologies like smart bombs and night-vision goggles.
The various minerals counted as REM, which include yttrium and neodymium, remain essential to a dizzying variety of advanced technologies in which, until the early 1990s, the United States had long been the world’s largest developer. Since then the Chinese have come to dominate the rare earth marketplace. Astonishingly, not a single American rare earths mine remains in operation today.
Glaring vulnerabilities like this sound a drumbeat for a coherent effort to rebuild the U.S. industrial base, and to reduce self-imposed impediments to strategic American competitiveness.
In this quest, the decline of U.S. mining should stand as both warning and a call for action. Its decline exemplifies the varied challenges facing U.S. industry. As a former defense official focused on China’s strategic assertiveness, I have a view of the market and production vulnerabilities that favor that country’s across-the-board challenge to the United States.
Despite our bottomless appetite for minerals and metals indispensable to the manufacture of smart phones, lithium-ion batteries and solar panels, we impose many obstacles to mining those very same minerals. The result: mining investment and minerals production has gone elsewhere.
This trend stands in total contrast to America’s resource position. The United States has some of the world’s largest mineral reserves (the U.S. Geological Survey estimates their value at $6.2 trillion). But our dependence on imported minerals is stark. The United States has become 100 percent import-dependent on 21 critical minerals, and we are now 50 percent, or more, import dependent on an additional 29 minerals.
Ask the mining industry what can be done to reverse this trend. Its answer: Reform the current mine permitting system. It regularly takes a decade or more to open a new mine in the United States. A redundant, broken mine permitting process has become an anchor on U.S. producers.
Despite the environmental sensitivities, no permitting process need take a decade. In Canada and Australia, nations with environmental safeguards on par with our own, mine permitting takes just two to three years.
The current focus on imbalanced trade should therefore lead to a new appreciation of our own self-imposed impediments to our own competitiveness. Glaring strategic vulnerabilities resulting from our REM dependency should further heighten awareness of the China Challenge. Tackling the self-imposed competitiveness barriers, like the cumbersome mine permitting process, may lack the political flair of new tariff announcements. But it counts for just as much, if not more.
