Digging a deep hole: rare earths debacle puts U.S. trade policy under scrutiny

Limiting the damage

Partly in response to recent government efforts to wean the U.S. off of Chinese supply, the Mountain Pass mine will reopen next year. Molycorp., the mine’s owner, says that it has cleaned up its act and will strive to be “environmentally superior.”

Brendan Cummings, the public lands director for the Center for Biological Diversity, says he’s convinced. The Center for Biological Diversity protested the mine in the past, but Cummings says that they’re major concerns have been addressed by Molycorp.

“The main objection in the past, where the problems in the mine spilled out of the mine, was the pipeline,” said Cummings. “They’re no longer using the pipeline, and their new plan is to deal with the wastewater onsite.” The tailing ponds used for evaporation will now be lined, Cummings said, and there are better systems in place to monitor spillage.

Cummings readily acknowledged that rare earth mining was not a “clean” industry, but he also said that the process could easily be much cleaner than it has been in the past. Cummings added that rare earths mining required a “different calculus” than, say, coal mining, since rare earths are ultimately desirable for their uses in  green technology.

See no evil, hear no evil

So, if rare earth mining can be done in a way that minimizes its environmental footprint, and if the government deems it a desirable industry, why hasn’t the U.S. promoted the production of rare earths in the past?

“This really, clearly points to one of the big difficulties of our abandoning trade and industrial policy in favor of open world markets,” said Lisa Margonelli, director of the Energy Policy Initiative at the New America Foundation.

Eileen Appelbaum, senior economist at the Center for Economic and Policy Research, agrees, calling the controversy around rare earths “emblematic of the fact that we did not have an industrial policy or an innovation policy.

So does Ed Richardson, vice president of Thomas and Skinner, an Indianapolis producer of permanent magnets.

“This is just one example of how the United States has lost a capability that it used to have,” he said. By believing that “global free trade will provide all the answers that we need in terms of an industrial policy,” Richardson continued, “we made a big mistake.”

Jack Lifton, co-founder of the consulting firm Technology Metals Research, says the irony is that China is simply following the model that the U.S. set out for them.

The Chinese “did exactly what we asked them to do,” Lifton said. “They started low-cost manufacturing using raw materials they could also produce at the lowest cost.”

“The capitalists in New York were popping champagne, saying, ‘We have achieved low cost!’” Lifton continued, “And now the Chinese are saying, ‘Phase two: we’re going to be the supplier, you guys can go out of business, and the capitalists in New York are saying, ‘Oh, you evil people.’ It’s completely ridiculous.”

According to Scott, Margonelli and Appelbaum, by focusing on price alone, the U.S. allowed the market to determine the value of crucial components like rare earths.

 “We made price the only criteria for where we would buy it, and we did not think about our national interests or our competitiveness going forward,” said Appelbaum.

“The way of thinking that came in in the 90’s was that you let the market do the work of apportioning the security of the commodities, and so if the price was cheap, you felt that the supply was secure,” added Margonelli. “So it was hands-off on the part of the government.”

“There’s a real question of whether we allow our whole trade policy and industrial policy in the U.S. to be driven by price, or do we think more in terms of what’s strategic and what do we need to have here,” she went on.

* proposed policy

Source: U.S. Department of Engergy, Critical Materials Strategy, December 2010