The House of Representatives is likely to vote on Congressman Eric Swalwell’s (D–CA) rare earths bill (H.R.1022) that would create a number of taxpayer-supported government programs to extract and recycle domestic rare earth minerals. But prices going up and down for rare earths don’t necessitate a government programs, even though that’s a popular solution in the halls of Congress. Congress should focus on opening access to America’s rare earth resources work with the Department of Defense to ensure our military has access to the rare earths it needs.
Rare earth elements are an important component for a number of products we buy, including smartphones, televisions, medicine, and batteries. They suffer from the misperception that they are hard to come by, but that’s hardly the case. America also has some 13 percent of world reserves, according the U.S. Geological Survey.
China supplies a large portion of America’s rare earth metals and is currently selling most of the world’s rare earth elements (REEs). China’s dominance over the rare earth market provides the fodder for concern and government loan guarantee programs, but both the concerns and policy prescriptions are misguided. Former Heritage scholar Derek Scissors wrote in 2011:
Chinese production dominance of REEs is unfortunate, but it is also unstable. While the viability of deposits varies with price, the PRC controls no more than 50 percent of world REE reserves, and as exploration continues, that number is likely to fall. China’s extreme production dominance can only last as long as it is willing to offer REEs at below-market prices.
This occurred for most of the past decade, which is why China now has the leading position. As soon as Beijing stopped undercutting market prices, prices rose and the global hunt for alternatives began—which has started to bring prices down. As long as suppliers can freely enter, the REE market will work properly, regardless of China’s role.
If it makes more sense to cheaply import rare earths, companies should be permitted to do so. Rather than subsidize technologies the private sector won’t invest in without a handout, the federal government should open access to the 13 states where rare earths are known to lie and establish an efficient regulatory pathway that provides companies with the certainty needed to extract REEs.
If any national security need exists for rare earths, Congress should work with the Defense Department to ensure our military has what it needs. Furthermore, the Energy Information Administration can play a limited role in providing information on reserves, but that’s where the federal government’s role should stop.
Milton Friedman once said, “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.” He should have added that there’d be a host of unnecessary federal government programs attempting to do things with the sand that the private sector has no interest in doing and is unwilling to do without government subsidies. When it comes to rare earth minerals and America’s abundant natural resources, the market will do just fine—if we just allow it work properly.