Foreign Policy Blogs

Green War: China, the U.S. and Rare Earths

The oil disaster in the Gulf has revived the Obama Administration’s interest in promoting its green technology agenda.  President Obama used the occasion of his recent Oval Office address to restate his view that the U.S. is falling behind China in the race to become the world’s green technology hub, with the implication that legions of “green collar” jobs that could be created in America are instead being created there.  However, it will take more than investment to create those jobs – there is a major commercial issue lurking that is likely to be a key point of contention at the upcoming G20 Summit in Toronto.

The point-at-issue is China’s domination of the market for rare earths.  Rare earths are a group of 17 elements that are critical to the development of many high-tech products from military technology to computers to mobile phones, including many promising green innovations like electric car engines, wind turbines, and a host of other high-efficiency goods.

While these elements are found in many places in the world, much of the world’s mining for them was shut down elsewhere over environmental concerns, which ceded an estimated 93-97 percent (depending upon the reporting source) share of the world’s rare earths market to China.  Moreover, in an effort to lure foreign investment, the Chinese government has steadily been applying a variety of protectionist measures to rare earth minerals in order to force foreign companies to set up shop in China rather than their home countries to get access to them.  In other words, China is attempting to steal green jobs not through market competition but by force.  So much for energy independence.

(Courtesy: Google Images, the Telegraph)

(Courtesy: Google Images, the Telegraph)

There are two main policy options that the Obama Administration can use to deal with this challenge: diversification and diplomacy.  As noted earlier, China isn’t the only country in possession of rare earth minerals.  The U.S., Canada, South Africa, Brazil and others all contain significant stocks as well. Diversification would, eventually, reduce China’s market dominance.

Then there is diplomacy.  Even if the U.S. and others choose to begin mining their rare earths immediately, the mines will take some time to get online, and China will in any case still retain a large share of the market.  The U.S. and the rest of the world will thus be compelled to deal with this issue for some time, so diplomacy could be coordinated and amplified to pressure China to ease its protections.  The U.S. is already collecting comments for a potential WTO case that could ultimately be joined by other nations.

Green job creation is going to require more than investment; skilled diplomacy is also needed, preferably with support from other countries.  This issue unites in concern a broad array of interested parties, from environmentalists to the Defense Department.  With a variety of issues to cover at the G20 meeting, it will be interesting to see if and how much attention this one receives.



Ryan Haddad

Ryan Haddad is the Senior Blogger for U.S. Foreign Policy at FPA. A foreign affairs and national security analyst based in Washington, D.C., he worked in European and Eurasian affairs at the U.S. Department of Commerce during the Bush Administration and is a graduate of the London School of Economics and Providence College. He can be followed on Twitter at @RIHaddad.