This week, the World Trade Organization (WTO) issued its much anticipated ruling on whether China’s export policies for critical metals violated the agreement it first entered in 2001 to be part of the WTO. The highest court within the WTO, known as the Appellate Body, found China was in violation of WTO requirements and had breached its original agreement. The decision marks a huge victory for the many automotive, high tech and alternative energy manufacturers globally that rely on China’s rare earth metal deposits to produce their goods.

As stated in a piece I published at Big Government in November, China has a complete monopoly on the 14 critical rare earth metals producing 97% of current world production. Products as fundamental to America’s industrial future as mobile phones, automobiles, televisions, fluorescent lighting, fiber optics and most of our advanced military hardware require rare earths. This monopoly has the potential to allow China to control production within all these trillion dollar industries by simply selling rare earths in China for far less than they sell them outside of China.

The situation had reached a critical state in 2011. Prices for metals such as neodymium have increased 20 fold in just the last 2 years making their use outside of China prohibitively expensive. The system of export quotas, tariffs and minimum export prices made the cost of rare earths nearly half within China then what they are outside China giving Chinese producers and companies China allows to build plants within China, an overwhelming cost advantage over other global producers; an advantage the WTO now says is illegal. The decision is also a major victory for our military which relies on Chinese rare earths to produce everything from Bradley Tanks and F-22 Fighter Jets to Body Armor and Night Vision Goggles.

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LOS ANGELES /PRNewswire/ — There will be no more “Made in the USA,” with millions of jobs lost if the United States doesn’t start mining and stock piling certain strategic metals, according to Alisha A. Ahern, co-director of the Academics & Periodicals Department at American Elements, the global chemical and metals manufacturer which published the list. Today the company released the 2011 U.S. Endangered Elements List (EEL11) naming the five metals that can most upset American industry, especially if the countries that the U.S. imports the metals from decide to shut off supply.

American Elements funded preparation of the EEL11 to help manufacturers, the government and consumers better understand the gravity of the situation. 20th Century metals such as copper, iron, nickel and tin have given way to 21^st Century critical metals, particularly the rare earths, of which the U.S. mines almost none.

“Today China mines a whopping 97 percent of all global rare earth production. America no longer has the resources to manufacture the things we invent,” says Ahern. “New metals like the rare earths have become essential to thousands of household goods including computers, cell phones, cars and nearly all electronics. If we lose access or run out of these elements, there will be no more ‘Made in the USA.’”

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The importance of strategic metals to the U.S. economy came into sharp focus last November when China cut off Japan’s rare earth metals supply over a territorial dispute and Japan immediately backed down. Since then, Americans have learned that the majority of rare earth deposits are in China, accounting for 97% of world production.

China’s action against Japan also exposed a more threatening strategy in the works‐‐ to create a two-tiered price structure with China’s manufacturers receiving rare earths at significantly lower costs than the rest of the world. Prices outside China are now 20 times what they were 2 years ago and 40% higher than inside China.

Is America confronting a situation similar to the 1970s OPEC oil embargo? No, the current situation is actually far worse. Deng Xiaoping famously noted 30 years ago that “the Mideast has oil, China has rare earths”. What he didn’t say was unlike the Mideast, China also has the means to manufacture and distribute globally every product that requires rare earths, which today includes automobiles, computers, cell phones, fluorescent lights, much of our military equipment and nearly every green technology‐electric cars, wind turbines, fuel cells, solar panels, etc. This is precisely what makes the current situation so dangerous to the long term prospects for the U.S. economy and American jobs. A two‐tiered price structure could make it impossible for American manufacturers to compete with China in the 21st Century.

A constant refrain from economists and politicians is that American innovation is our way out of the current financial dilemma. Breakthrough U.S. discoveries in the past have created whole industries such as automobiles, commercial flight and computers, generating millions of jobs and national prosperity. But what if we are unable to participate in the next great American discovery simply because we can’t get the necessary raw materials at competitive prices? The millions of jobs would blossom where the materials are available. Today, that is China.

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