Strategic Materials Advisory Council Challenges Failed U.S. Government Policies on Rare Earth Supplies

Press Release, Strategic Materials Advisory Council

Washington, DC – The Strategic Materials Advisory Council today strongly criticized U.S. Government – and in particular, Department of Defense (DoD) – policies that fail to address ongoing, serious concerns about the supply chain for rare earth elements. Completely disregarding concerns about the lack of diversified sources and the potential for increased supply chain vulnerabilities, a recent DoD report observes that rare earth market conditions have “significantly improved for consumers of rare earths, including suppliers within the U.S. industrial base”.

“The blind pursuit of a ‘consumer’ solution to supply chain issues only deepens U.S. dependence upon the cheapest source of material, without regard for what is best for the country’s security and for our industrial base,” said Council Co-Chairman Dean Popps. “The job of government is to protect critical supply chains, just as it would protect the nation’s shipping lanes and airspace. How is this any different?”

The report cites decreased demand in “important segments” of the rare earth market, lower prices for the most commonly-used light rare earth elements, and recent investments in the U.S. and Canadian rare earth supply chains as positive market conditions. SMAC disagrees.

“Bargain basement prices for Chinese-produced rare earths from the 1980s through the early 2000s led to the evaporation of the U.S. and allies’ supply chains,” continued Popps. “Heralding the return of such conditions, which were compounded by the March 26th World Trade Organization ruling against Chinese export quotas, is a failure of U.S. policy that damages prospects for sustained investment in U.S. production of critical national security materials. A U.S. policy that assures foreign dominance of rare earths is no policy at all; it is a disingenuous subsidy of a foreign nation.”

In addition, the report mentions the Defense Priorities and Allocations System (DPAS), which requires U.S. prime contractors, subcontractors, and material suppliers for a U.S. military system to meet requirements for that system ahead of commercial orders. This can be extended to some companies in certain foreign countries (e.g., Canada, Australia) that have agreed to Security of Supply Arrangements.

Popps expressed disappointment in the lack of attention paid to DPAS in the report, saying, “DPAS is designed to be self-enforcing through the supply chain. But if your supply chain runs into a Chinese supplier — as has already occurred in systems used in the Joint Strike Fighter (F-35 Lightning II) — the restrictions do not apply. The Defense Department must thoroughly review its industrial policy tools and apply them to the globalized supply chains of today and not those of the Cold War.”

The Strategic Materials Advisory Council urges the Obama Administration to require a DoD reevaluation of current surety of supply policies and to take meaningful action to develop a secure supply chain of rare earths and other critical materials. The Council will continue to raise awareness of these issues and work to promote effective policy for the defense industrial base.

About the Council

The Strategic Materials Advisory Council is a Washington, DC based non-profit organization comprised of former U.S. Government leaders and industry experts with significant experience with strategic and critical materials through decades of service in the public and private sector. The Council was formed with the clear objective to promote policy solutions that ensure continued access of both U.S. industry and military to those materials needed to support a robust 21st century economy and military.

For more information, contact:
Jeffery Green
Executive Director, Strategic Materials Advisory Council
(202) 412-7478

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