Why Price Controls on Rare Earths Won't Help America
A recent proposal to set price floors on rare earth minerals aims to counter China's restrictions on these vital resources. However, this approach could backfire, hurting American industries and failing to change China's policies.
The Problem with Price Controls
Price controls are not a new idea, but their results are often mixed. The proposed price floors aim to prevent China from selling rare earths at low prices to American businesses. This would benefit MP Minerals, the only rare earth miner in the U.S., which recently received a 15% stake from the federal government.
Unanswered Questions
The Trump administration has not yet specified:
- Which goods would be affected
- How high the prices would be
- What legal authority the president has to set these prices without Congress
Price Floors vs. Tariffs
While price floors might seem similar to tariffs, they come with their own set of problems. They could be less likely to be struck down by courts but are still a form of protectionism. Instead, the U.S. should focus on making its own mining industry more competitive.
The Real Issue: Mining Permits
The problem is not a lack of rare earth minerals. They are found all over the world, including in the U.S. The issue is the difficulty of opening new mines. On average, it takes 29 years to go from discovering a mineral deposit to producing it. A significant part of this delay is the permitting process, which can take seven to ten years.
Steps Taken by the Trump Administration
The Trump administration has taken some steps to speed up the permitting process. They added key mining projects to the FAST-41 program, which makes the environmental review process more coordinated. However, there are still exemptions that mostly benefit lobbyists.
The Need for Broad-Based Permitting Process
To truly compete with China, the U.S. needs a broad-based and technology-neutral permitting process. This would allow a wide range of projects to benefit from a more streamlined process and encourage innovative ways to protect the environment.
Conclusion
China's actions on rare earths are a problem, but tariffs, price controls, and industrial policy won't solve it. The best way to ensure that America's technology, defense, and electric vehicle sectors have the rare earths they need is through deregulation and openness.
