The growth of the global economy has provided both opportunities and challenges to American businesses, including motor vehicle parts manufacturers.  Materials and inputs that go into manufactured goods may be sourced thousands of miles away from the place of production.  Difficulties in securing needed materials in today’s complex global supply chain can be numerous and varied.  Of increasing concern to parts suppliers and other key industries is the supply of rare earth elements (REEs).

China currently controls 97 percent of the world’s REE mine production and 50 percent of reserves.  The United States, at one time self-reliant on sourcing its REE needs, now imports 100 percent of rare earths materials, primarily from China.  China is the world’s second largest economy after the United States and many observers see China using its REE dominance to help steer its strategic economic plans.  China’s efforts in recent years to restrict its rare earth exports and mining production can be seen as part of this economic strategy and not an action taken out of concern for the environment or natural resources as it has stated. 

In 2009, the United States filed a case against China at the World Trade Organization (WTO) for its export restrictions on a number of raw materials that are important to many American industries.  This summer, the WTO panel ruled in favor of the United States and a final appeal decision expected early next year upholding the U.S. position could be helpful in persuading China to ease its rare earth export restrictions given the similarities of the two export policies. 

Responding to concerns from OESA members, MEMA/OESA sent a letter to U.S. Trade Representative (USTR) Ron Kirk on Nov.4, 2011, urging him to take a strong position against China’s rare earth policies at last month’s U.S.-China Joint Commission on Commerce & Trade annual meeting.  “While fully aware that there are many pressing issues relating to U.S.-China trade, MEMA joins other key sectors in the belief that rare earth elements should be a priority in the U.S.-China dialogue,” the letter stated.  In the coming weeks, OESA will be conducting a member survey to determine to what extent China’s REE policies are disrupting the supply of rare earths.   

In addition, MEMA is taking stock of congressional legislation that seeks to reestablish a domestic rare earth industry while forming alliances with foreign allies in seeking out new sources of rare earths.  MEMA Washington office staff continues to seek input from OESA members on the impact of the availability of REEs on supplier companies.  If you have any questions, or would like more information, please contact Dan Houton at dhouton@mema.org or 202.312.9250.      

Ann Wilson may be contacted at 202.312.9246 or awilson@mema.org.