[Rare Earths] The knee-jerk reaction against protectionism isn’t justified, just look at the military – by Lawrence Solomon (Financial Post – April 7, 2017)

http://business.financialpost.com/

Protectionism gets a bad rap among the enlightened, as if protectionism is always bad, and free trade is always good. The knee-jerk against protectionism isn’t justified. In many areas, protectionism is prudent while free markets are foolhardy.

The need for protectionism is clearest seen in the case of the military. Consider what would happen if the U.S. could not protect its military industries from competition from abroad. A savvy military competitor with a command-and-control economy, such as China, would soon capture America’s strategic military markets.

In an extreme example, the U.S. government would be buying its nuclear weaponry from the lowest cost supplier, i.e., China, losing the ability to manufacture its nuclear arsenal domestically. The U.S. military would then be dependent on the good will of an adversary, an entirely unacceptable outcome.

The need for protectionism is also clearly seen in the case of products and services that can be used for military purposes, whether cyber technology needed for military purposes, strategic infrastructure such as power plants or raw materials required for strategic industries. A live issue now concerns rare earths — naturally occurring materials that include scandium, yttrium, lanthanum and others in this group of 17 little-known chemical elements.

Rare earths, which are ubiquitous in cell phones, computers, TVs and other consumer products, are vital in laser-guided missiles, catapults that launch fighter jets from aircraft carriers and the Pentagon’s showcase F-35 fighter jet.

The U.S. military cannot allow itself to be captive to an unreliable supplier yet, with the 2015 bankruptcy of Molycorp, a producer of rare earths in the Mojave Desert, it lost its last domestic supplier. The U.S. is now entirely dependent on imports from overseas, most notably China, whose 90 per cent of the rare earths world market has allowed it to control prices.

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