Marco Rubio introduces bill to combat China's rare earth monopoly

By CongressFOXBusiness

The risks from China trade tensions to US access to rare earths

Blue Line Corp. CEO Jon Blumenthal on the impact of U.S. trade tensions with China on the rare earth market.

Sen. Marco Rubio introduced legislation on Thursday intended to boost American competitiveness in processing critical rare-earth minerals after China signaled it could weaponize its dominance in the sector in the midst of the year-long trade war.

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The Florida Republican’s plan, named the RE-Coop 21st Century Manufacturing Act, would establish a privately funded operated and managed cooperative tasked with the creation of a fully integrated domestic rare earth value chain, according to a news release from Rubio’s office.

The cooperative would be exempt from antitrust laws in an attempt to protect it from mass government-backed production in China, according to the Wall Street Journal. Although it would be privately funded, Secretary of Commerce Wilbur Ross would need to secure a charter for the business, the Journal reported.

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In a statement, Rubio blamed “mercantilist tactics” by the Chinese for the “market failure” of rare-earth development in the U.S.

“Continued U.S. dependence on China for the mining and processing of rare earths and the manufacture of those metals into useful products is untenable,” he said. “It threatens our national security, limits our economic productivity, and robs working-class Americans of future opportunities for dignified work.”

Rare earths, a group of 17 metals considered critical for multiple sectors in the U.S., including national defense, are used to produce a number of products ranging from smart phones, cameras and nuclear rods. While not actually rare, China accounts for more than 95 percent of global output, according to the U.S. Geological Survey.

At the end of May, amid inflamed trade tensions with the U.S., Beijing issued a thinly veiled threat that it was preparing to target exports of rare earth minerals, less than two weeks after President Trump blacklisted Chinese telecom firm Huawei.

State-run Chinese media, at the time, strongly implied that there could be a crackdown on rare earth sales to the U.S.

“Will rare earths become a counter weapon for China to hit back against the pressure the United States has put on for no reason at all? The answer is no mystery,” commentary published by the People’s Daily (the official newspaper of the Communist Party) said. “We advise the U.S. side not to underestimate the Chinese side’s ability to safeguard its development rights and interests. Don’t say we didn’t warn you!”

The U.S. is heavily dependent on China for the minerals, relying on it for about four of every five tons of rare-earths imports between 2014 and 2017. Last year, the U.S. purchased $160 million in rare earths.

The Department of Defense began seeking new federal funds to increase domestic production of rare earth minerals and reduce dependence on China in May, according to Reuters.

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The U.S. has one rare-earth mine that’s currently in operation and it’s based in California.

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