Breaking free from China: A three-part plan for American critical materials sovereignty

The United States remains heavily dependent on Communist China for raw materials crucial for manufacturing civilian and defense technology. Previous presidential administrations assisted the Chinese regime to develop a near-monopoly on critical minerals. They include rare earth metals necessary for electronics hardware. The Trump Administration was early to commit to reversing Communist China’s strategic gains in this area, but has been slow to implement. Rather than simply diversify US procurement of critical materials from countries apart from China, the United States should facilitate domestic production as a strategic priority.

Legislative action. This spring, a group of 21 House Republicans, including Conference Chair Liz Cheney (R-WY) and House Freedom Caucus Chairman Andy Biggs (R-AZ), requested the President to utilize the Defense Production Act to expedite permitting for critical mineral refinery construction in the United States.

That action was followed by an April 24 letter to the Trump administration from Senator Ted Cruz (R-TX), and co-signed by Senators Tom Cotton (R-AR), Cory Gardner (R-CO), Martha McSally (R-AZ), and Mike Enzi and John Barrasso (R-WY). The senators called on Defense Secretary Mark Esper and Secretary of Interior David Bernhardt to support the development of a fully domestic rare earth supply chain, as called for in the Presidential Executive Order on a Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals of December 2017.

The lawmakers’ letters, while a step in the right direction, show that Washington is still at the letter-writing stage and has not to figured out a formula necessary to jump start a US-based critical mineral economy.

Elimination of American dependence on foreign minerals and materials will take a lot more than letters of encouragement to the Administration. Without a federal strategy to ensure America’s future as a producer of critical minerals for domestic consumption and export, the nation will fail to recover the strategic edge that its business and political elites gave away to China.

Lack of US strategy. Lack of an American critical minerals recovery strategy left a vacuum for others to fill.  Australia, the closest US ally in the Indo-Pacific region, has made major infrastructure investments to become the next stop in the long history of American consumerism. This is a good thing. Australia announced an intent to invest billions in its own critical mineral infrastructure to establish itself as a key player in the global critical mineral supply. Former federal resources minister Matt Canavan led a delegation to Washington late last year to work with administration officials and the Pentagon to secure Australia as the next source for military critical mineral supplies outside China.

The initiative is an important step toward building up a loyal ally as an alternative to the Chinese Communist Party. However, it still leaves the United States almost completely dependent on foreign sources of critical minerals. Australia’s own emerging recognition of Beijing’s subversion of its institutions – while overdue, welcome, and deserving of full US support – is only at its early stages and remains a cause for concern about Canberra’s long-term reliability. Meanwhile, the US has similar problems of its own.

Another problem is the partial Communist Chinese ownership of one of Australia’s main critical minerals producers. This is a major issue. Given how the Party influences any company its members touch, even partial Chinese ownership or management should negate a producer as a reliable or even desirable supplier. The underlying result of the Australia alternative as it now stands is the continued neglect of an American supply chain.

Pentagon contract doesn’t fix the problem. The Pentagon awarded the largest Australian rare earths company, Lynas, with Phase 1 project financing in which Lynas will be assigned to complete modeling for a US -based processing center in collaboration with the American rare earths processor Blue Line. Australia in the meantime does not hide its longer term intentions to secure its critical minerals supremacy. The Lynas CEO proclaimed proudly that “the company has been focused on growing in the rare earths’ space within the past few months, working to bring more rare earths downstream processing to Australia.”

That appears to show that the DoD contract was never meant to assist the United States or its interests, but rather to ensure that Lynas is taking care of Australian business. From a sovereign Australian perspective, this is good business and smart statecraft. From a sovereign American perspective, it is a major positive improvement over the China-centric status quo, but still leaves the US dependent on foreign suppliers over which it has no control.

Time to have our own critical minerals supply chain. The Wuhan Virus pandemic that started in China has proven long-held concerns that globalist supply chains are an Achilles’ heel of America’s industrial and technological might, its economy, and its national sovereignty.

By allowing others to function as key links in the American supply chain, past US leaders have placed the nation at tremendous national security and economic risk. The Australia alternative was not an American solution for Americans, but an Australian solution for Australians. The Chinese have a strategy. Our Australian allies have a strategy to blunt part of the Chinese strategy. The United States has no strategy. This is a problem.

The senators concerned with this problem are correct when they write that “our dependence on China for vital rare earths threatens our US manufacturing and defense industrial base” and that “ensuring a US supply of domestically sourced rare earths will reduce our vulnerability to supply disruptions that poses a grave risk to our military readiness.”

The question, then, is whether Washington will do what it takes to move forward with a comprehensive national strategy for a robust US-based critical materials economy.

Partners are partners and allies are allies. They are not colonies. One cannot argue against the notion that reliance on any other country in the future does not in some way “threaten our US manufacturing and defense industrial base.” We must be mindful that reliance on other allies, even close ones, is not going to secure critical supplies for America’s manufacturing and defense industrial base.

As solid an ally as Australia has been, one cannot escape the awful fact that Communist China has infiltrated and subverted all Australian institutions, as it has our own. Beijing has only begun openly to threaten Australia with economic hardship in retaliation for calling for an independent, open investigation of the source of the Wuhan Virus pandemic. As Australia’s largest trading partner, China has far more influence on the Australian economy than does the United States.

We must be mindful, then, that our military dependence on Australia is only as good as Australia’s ability to resist Chinese Communist Party economic pressure on its political system, and that Beijing will continue to exert its influence to further its own geopolitical interests. The Pentagon’s recent relationship with Australian critical minerals suppliers can end on a whim with a liberal progressive government taking over that seeks to appease the Chinese Communists again.

Likewise, a future American government could be induced by Communist Chinese persuasion and pressure to reduce dependence on Australia and “partner” back with Beijing.

Removing Communist China from DoD-funded projects. The Pentagon shows a disturbing pattern of support for US-based projects that appear disconnected from China but in fact are intertwined. The risk expands beyond Australian companies such as Lynas and includes American companies with Communist Chinese investors or personnel. DoD recently gave an award to MP Materials, the owner and operator of Mountain Pass in California, which the company touts as “the only rare earth mining and processing site in North America.”

MP Materials, which recently acquired the trouble-plagued, bankrupted Mountain Pass operation, is a partnership of a Chicago hedge fund, a New York investment house, and China’s Shenghe Resources Holding Co. Ltd., the latter of which holds a 9.9% stake in the company. The American investors depend on the Chinese to provide much of the mining and processing know-how.

The company was formed specifically to buy the bankrupted Mountain Pass operation in 2017, raising eyebrows about why American investors would want to bring Chinese rare earths mining into the territorial United States. The DoD award, intended to serve as phase one of a Pentagon effort to “reduce US supply chain vulnerabilities by ultimately enabling commercial scale production and operation of a US-based Heavy Rare Earth separation facility,” still includes Communist China. Added to that is another problem: Mountain Pass’ mineral composition is not a heavy rare earth facility but a light rare earth one.

By contrast, the Department of Energy is taking a second look at China’s Shenghe Resources’ 9.9% stake in MP Materials. Reports indicate that DOE has explicitly instructed its science teams not collaborate with MP Materials. The reasoning, DOE officials say, is precisely because of the stake of the Chinese investor, coupled with the fact that MP Materials has relied heavily on Chinese sales and technical know-how. Department of Energy officials say “the MP Materials ownership structure is an issue.”

This raises the question why Chinese involvement is not an issue with the Pentagon, despite the fact that MP Materials would supply the US military with exotic raw materials for high-tech weapons systems.

An ‘America First’ approach to rare earth mineral supplies. If the Pentagon’s first foray into heavy rare earth grant-making sprinkled federal dollars on two light rare earth producers – one of Australian and Malaysian origin and the the other an American company with Chinese stake of ownership that provides expertise to the non-expert majority investors – one must seek a better “America First” way to secure rare earth minerals. That better way consists of three easy parts.

First, the administration should breathe life back into the old Bureau of Mines, which was abolished under the Clinton administration. A revived Bureau of Mines would enable the Department of Interior to return to its role in US resource development. It would give Interior its own in-house agency to collaborate with existing activities across the Departments of Commerce, Defense, and Energy by providing the specialized mineral production knowledge and management functions required to re-establish commercially competitive critical mineral value chains in the US. It would finally give the executive branch the capacity to cover all phases of production throughout the entire development process, including the oversight of end product manufacture.

Second, Congress can utilize one of the stimulus packages or the must-pass defense authorization bill to fund America First pilot plant projects with a focus on critical minerals.  Such support can be even more impactful to encourage American ingenuity to recover recover critical minerals from unconventional sources – historic mine waste, critical minerals-rich acid mine drainage, and even recycling electronic waste.  Americans can innovate unexpected solutions to relieve critical minerals dependencies in many ways beyond the conventional methods of mining.

Third, the US should remove barriers to critical minerals sovereignty by ensuring that every critical mineral project gets expedited federal permitting. The nation cannot afford more 10-year waits for federal approval.  Such delays serve to benefit the Congolese warlords forcing child labor to hammer out the cobalt in our cell phones, and the Chinese Communist Party leaders who hold the strings to rare earths. If we expect serious critical minerals sovereignty for our next-generation defense and general manufacturing needs, policymakers must start taking seriously the effect of burdensome regulations and red tape that give bad actors and military adversaries a tipping advantage. The good news is that there’s already a way to expedite permitting:  FAST-41. All President Trump needs to do is order the agency overseeing it to put critical minerals companies on the fast track.

Yechezkel Moskowitz is CEO of Materia USA LLC and a Senior Fellow at the Center for Security Policy.