The trade-security nexus and U.S. policy making in critical minerals

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10 Scopus citations

Abstract

The United States increasingly relies on import to meet its demand for critical minerals. Using the case of rare earth elements (REEs), this paper analyzes the conditions and the strategies for the U.S. government to address import dependence. The paper finds that market factors, including the lack of comparable and sufficient substitutes and recycling, the high ratio of import relative to consumption, the high concentration of import supply by country, and regulations from the major supplier country, were insufficient to prompt intervention. Significant policy action only occurs when changing circumstances turn import dependence into perceived national security threats to the United States and its allies. The paper then examines U.S. domestic policy to mitigate import dependence during the Obama administration. It finds strong support for scientific research and development and for international collaboration with ally countries in the downstream, but limited support for upstream applied research and resource diplomacy, and limited engagement with the domestic and international private sector. The paper further analyzes policy trends under the current Trump administration and provides recommendations for future U.S. policy.

Original languageEnglish
Pages (from-to)238-249
Number of pages12
JournalResources Policy
Volume59
DOIs
StatePublished - Dec 2018

Bibliographical note

Funding Information:
The Obama administration largely supported basic research instead of regulatory changes or financing for upstream projects. Funding for basic upstream-related research has continued at previous levels in agencies like USGS and NSF, with new funding from DOE.

Funding Information:
While no REE-specific bills advanced into law, Congress has directed federal agencies to assess or mitigate supply risks through budget bills. The NDAA is one prominent vehicle ( Table 1 ). Congress has also approved R&D funding on critical materials through appropriations bills for agencies such as DOE, USGS, DOD, and the National Science Foundation (NSF). The next section provides a closer look at the actions of federal agencies.

Funding Information:
The federal government largely refrained from directly supporting the private sector in the domestic upstream. There was modest funding for applied upstream R&D, such as a $1.2 million REE supply chain development program funded by the Army Research Laboratory (ARL) at DOD ( Innovation Metals Corp IMC, 2014 ). Legislative proposals to provide financing, like through DOE's Loan Guarantee Program, stalled in Congress, so domestic producers looked primarily to private investors and the stock market. For instance, Molycorp was rejected for DOE loan guarantee in 2010; it withdrew its second application to the program after securing funds via a capital tie-up with Sumitomo and plans to supply REEs to Sumitomo and Mitsubishi, both Japanese trading houses ( Koyano, 2010; U.S. Department of Energy Office of NEPA Policy and Compliance, n.d. ). The Mountain Pass part of the business issued $650 million in senior secured notes, before Molycorp's bankruptcy in 2015 ( Hals, 2015 ).

Funding Information:
The author thanks the anonymous reviewers for their comments that helped to improve the manuscript. Initial fieldwork for this project was supported by George Washington University Center for International Business Education and Research Summer Doctoral Institute. The author is solely responsible for the views of this paper and any errors.

Publisher Copyright:
© 2018 Elsevier Ltd

Keywords

  • Critical minerals
  • Import dependence
  • Minerals policy
  • Rare earth elements
  • Trade-security nexus

ASJC Scopus subject areas

  • Sociology and Political Science
  • Economics and Econometrics
  • Management, Monitoring, Policy and Law
  • Law

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