For most of us, the terms yttrium, praseodymium and terbium are about as riveting as staring at a blank wall. But in Germany last week, rare earth elements such as these were fodder for hours of lively discussion and debate.
Citing remarks by German Economics Minister Rainer Bruederle after the meeting, the Wall Street Journal reported that Germany is especially “feeling the effects of current supply shortages of rare earth materials,” and that competition for rare earth materials “was now a problem of politics in addition to economics” (emphasis mine throughout).
This is not something Germany can forget about. Rare earth materials are essential in high-tech equipment such as tv screens, mobile phones, fiber optics, computer chips and electric motors. For Germany, a manufacturing behemoth, any shortage of these critical elements could spell disaster. In its report on the conference, the New York Times noted that “the consensus among attendees, who included representatives from industry as well as the European Union, the World Trade Organization and the World Bank, was that trade rules were inadequate when it came to responding to China’s decision to cut back export quotas of such materials.”
In other words, Germany believes this must be addressed, and soon. Ultimately, Berlin has two options, neither of which serves the interests of the United States. First, and this is likely in the short term, it could come to some sort of bilateral agreement with Beijing securing the flow of rare earths into Germany.
The question is, would Berlin cut the U.S. into the deal? Or would America have to strike its own deal with China?—which wouldn’t be easy amid the ongoing Sino-American dispute over currency manipulation, trade and so on.
Second—and this option will be pursued even if an agreement with China is formed—Germany must secure its own source of rare earth elements. Although China controls 95 percent of the rare earth market, expect Germany to step up its pursuit of these materials, especially in mineral-rich regions like Africa. •