Detroiters love us some Motown music. The Supremes. The Temptations. Smokey Robinson and the Miracles. The list goes on. A lesser known Motown artist from the late 60s/early 70s was a group called Rare Earth. A bit more rock than R&B. A few decent albums. Some original songs. Perhaps best known for their covers of other Motown artists. Rare Earth is a deep track even in Motown playlists.
I have seen several headlines in the last few days talking about Rare Earth. Imagine my disappointment when I clicked through only to find no mention of the erstwhile Motown group. Rare earth elements? What the hell are they, and why should we give a damn?
Rare Earth Is In Almost Everything
A host of industries use rare earth elements (REE) due to their unique magnetic and electrical properties. Automotive, defense, aerospace, semiconductors, personal electronics, medical equipment, renewable energy, etc. They all use REE. On cars built in Motown, we find REE in electric motors, generators, alternators, catalytic converters, power steering, sensors and more.
REE shortages can cause real problems in the supply chain. Shortages of a single component can halt an entire assembly line. When vehicle assembly lines go down, they stop ordering things like wheels, seats, engines, and transmissions. This causes suppliers to shut down their production, which then ripples through the supply chain. An REE shortage can idle hundreds of production lines and thousands of workers.
China Has A Near Monopoly On REE
China produces over 60% of the global supply of REE. China processes almost 90% of the world’s REE. In earlier posts, I noted that China’s control of REE is a significant lever in trade negotiations. China is pulling that lever.
Since the Administration declared the trade war, China has implemented restrictions on its export of REE. Manufacturers started sounding the alarm about these restrictions some weeks ago. In recent days, those chickens have come home to roost. Manufacturers and suppliers are announcing shutdowns due to shortages of REE with increasing frequency .
The Administration claims that China committed to loosening export restrictions on REE in connection with the 90-day pause. According to Administration officials, China is slow-walking the loosened restrictions. China of course has its own story about the US not meeting its commitments. Regardless of who is correct, the Administration did not act with sufficient alacrity to mitigate our REE vulnerability with China. These supply chains are weeks and months long. It is not as simple as flipping a switch. By the time the Administration announced the 90-day pause, it was already too late to avoid supply disruptions.
Remember That Time The Administration Had A Crush On Greenland
You may recall earlier this year, the Administration announced its desire to acquire Greenland. Acquiring Greenland was said to be in our national security interest given its proximity – through the Arctic circle – to Russia and China. In fact, the US already has a military installation in Greenland. But there were other reasons for the Administration’s interest in Greenland, such as REE. Greenland has substantial deposits of REE.
The President sent the Vice President to open negotiations to acquire Greenland. The Vice President visited Greenland at the end of March – without an invitation, mind you. While there, the Vice President accused Denmark of failing the people of Greenland. He claimed that Greenland needed a change of leadership. The people of Greenland and Denmark did not appreciate the Vice President’s comments. Officials from Greenland and Denmark rebuked the Vice President and made it clear that Greenland was not for sale.
Two months later, the EU and Greenland announced a 30-year deal to mine a rock used in aluminum production. This is a prelude to the EU and Greenland entering a deal to mine REE. This was the EU and Greenland giving the Administration the finger. The US now is on the outside looking in. The Vice President squandered the opportunity, if there ever was one. This was a textbook example of how not to conduct international diplomacy.
Ready, Fire, Aim!
In April, the US and Ukraine announced a deal that gives the US access to REE in Ukraine. This is a positive step, though it will take months or years to mobilize mining assets. And we still may have to deal with China to process REE. The China issue is not going away.
In the meantime, this all feels like more Ready-Fire-Aim. Did the Administration think China would not flex its muscle? Did they understand how supply chains actually work? Did they think Rare Earth was just a Motown group? The Administration behaves like it can just bully its way through most any issue. Except our foreign counter-parties are not playing along. The Administration got out-maneuvered by Greenland and Denmark, for crying out loud. Let that sink in for a minute. Now comes Japan, South Korea, Canada, the EU, and China. They all have cards to play, and they are playing them expertly. Meanwhile, our team of rag-tags can’t get out of their own way. It is amateur hour in the White House.
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