America's relative fall from defense technological leadership mirrors its decline in rare earth capabilities.
This is an appalling story of a long-running U.S. economic and national security failure that has put the nation behind China on many next-generation weapon systems while stifling the economy.
Meanwhile, China's advances are largely built on its unparalleled commitment to leading the world in rare earth resource production, refining, material science, metallurgy, intellectual property, research and development, and commercial and defense applications. Rare earths are 17 elements on the periodic table that are now critical components in most modern technologies and weapon systems.
The U.S. rare earth supply chain was first compromised in 1980. A Nuclear Regulatory Commission and International Atomic Energy Agency change in regulations--"Part 40: Domestic Licensing of Source Material"--inadvertently ushered in the transfer of all aspects of U.S. rare earth industry to China.
Prior to that, heavy rare earths came from thorium-bearing byproducts of commodities such as iron ore, titanium, zircon or rock phosphate. Companies that mined these minerals could extract the rare earth byproducts and make a little extra profit. Once anything containing thorium was considered a potential source of nuclear fuel and highly regulated, that ended. Due to the costs and liabilities, these mining companies diverted these rare earth resources into their mine tailings as waste and buried them.
This had a profound impact on rare earth production in all NRC/IAEA compliant countries. China is an IAEA observer, but not a signatory to its agreements.
Today, the disparity between China and the United States continues in part because the Pentagon, government agencies, and the finance and mining industries measure the extraction of rare earths at the mining and oxide production level. Hundreds of rare earth mining projects outside of China have been initiated, giving the erroneous impression that Western rare earth dependence on China may be declining. However, most ultimately fail.
Out of more than 400 rare earth startups publicly listed in 2012, less than five reached production. Of those, only two reached significant volumes. Of those two, one is bankrupt and resurrected with Chinese financing and the other lost its operating permit for a short period.
During this time, China has taken significant equity and debt positions in many of these failed or faltering...