Podcast Transcript — Beyond Rare Earths: Why the West’s Supply Chain Problem Is Bigger Than China
On December 11, the Association of Foreign Press Correspondents (AFPC-USA), hosted a podcast, in partnership with the Hinrich Foundation, titled “Lessons from How China Played Its Rare Earth Card.”
If Western countries try to use special interventions or workarounds to reduce China’s control over rare earth minerals, writes Senior Research Fellow Stewart Paterson, that alone won’t solve their broader reliance on other countries for important materials. Moreover, a key lesson from the Russia–Ukraine war was that many essential components for modern technologies come from industrial processes that Western nations no longer produce at large scale. So, to truly strengthen economic security, countries need a broader, coordinated global trade strategy that prioritizes cooperation with politically aligned partners, not just one-off fixes.
The podcast episode was hosted by Roseanne Gerin, a former editor at Radio Free Asia in Washington, who has worked in journalism for more than 25 years.
This podcast episode was produced in partnership with the Hinrich Foundation. AFPC-USA is solely responsible for the content of this episode. Learning takeaways for the discussion can be found HERE.
Roseanne Gerin: Welcome to the Foreign Press Podcast, an educational program from the Association of Foreign Press Correspondents in the USA, in partnership with the Hinrich Foundation, an Asia-based philanthropic organization dedicated to advancing mutually beneficial and sustainable global trade. AFPC-USA is solely responsible for the content of this episode. I'm Roseanne Gerin, formerly with Radio Free Asia in Washington. Today we're joined by Stewart Paterson, Senior Research Fellow at the Hinrich Foundation, to discuss his timely article “Lessons from how China played its rare earth card.” Stewart spent 25 years in capital markets as an equity researcher, strategist, and fund manager, holding senior roles in London, Mumbai, Hong Kong, and Singapore. He brings three decades of global market experience to his analysis of how macroeconomics shapes trade, geopolitics, and prosperity. Stewart, thank you for joining us.
Stewart Paterson: Thank you very much for having me on your podcast.
Roseanne Gerin: Before we dive in, here's why this report matters now. It shows how China built a rare earth and permanent magnet monopoly over decades, and how recent export controls have finally triggered a coordinated response — from new legislation in the US and the EU to alliances like the Minerals Security Partnership. The sobering takeaway is that even with government backing, it will take at least a decade for the United States and its allies to achieve self-sufficiency, and breaking China's grip will require genuine cooperation. And Stewart makes a broader point: This isn't just about rare earths. Other critical inputs like neon gas, are tied to industrial processes that many advanced economies no longer produce at scale. The lesson is clear — real economic security depends on building a multilateral trading system grounded in geopolitical alignment. Stewart Paterson, thank you for writing this important article. Let's get into the questions.
Before we get into the bigger picture. I'd love for you to walk us through the basics of rare earths, why they matter so much, and which industries depend on them.
Stewart Paterson: Well, thank you, Roseanne. So rare earths: We’re really talking here about a group of 17 elements with similar chemical properties that ironically actually aren't that rare in terms of their occurrence. What they are though, is they are diffuse, so commercially viable deposits of rare earths are not so frequently found. And in terms of their usage, basically, if you think of anything modern and useful, it will use rare earths in some shape or form. So, this would range from MRI scanners and medical equipment to the mobile phone in your pocket and your laptop. They're used in LED screens, LCDs and, of course, in sophisticated weaponry as well, and weapon systems. So, really their usage is very widespread indeed.
Roseanne Gerin: Great. How did China achieve its commanding position in this sector, and why are countries like the United States dependent on China for critical minerals?
Stewart Paterson: Ok, so China has been blessed with a surfeit of rare earth deposits. So, it is natural that China is a leading player in the rare earth sector, but really the story of its dominance, and as you mentioned, the rest of the world's dependency on China for rare earths, is a story of industrial policy originated by China. So, in the early 1990s, when Deng Xiaoping made his famous tour of the southern states to articulate his desire for a more modern political economy in China, he said the Middle East has oil and China has rare earths. And so, rare earths have always formed in the Chinese Communist Party's mind a strategic value that they believe will be a source of national power. And so, through a combination of industrial subsidy, state guidance, and, of course, low environmental standards — which is something we'll come onto — China has put itself in a position where it has become really the monopolistic provider of rare earth elements.
Roseanne Gerin: So, given that dependence, what are the concrete risks of relying so heavily on China for rare earths and permanent magnets, especially for defense systems, renewable energy systems, and advanced manufacturing?
Stewart Paterson: The risks are becoming more evident, but I think they've always been pretty self-evident, which is that China, by having this monopolist grip over the industry, has the ability to close down production elsewhere — production that uses these rare earth elements or the magnets that they go into. And in doing so, of course, it has the ability to impose a very high economic cost on other countries. And in doing that, to bend them to their will. And so, it's clearly not conducive to strategic autonomy or even to the prosperity of other countries to find themselves in a position of complete dependency on China for this.
Roseanne Gerin: You write that China cultivated its monopoly over many decades and really “played the rare earth card against Japan” back in 2010. Can you walk us through what happened at that time?
Stewart Paterson: Yeah, sure. The building up of the monopoly really took place between, I suppose, 1995 and 2005. America itself had a very vibrant and large magnet producer in the form of Magnequench, which was a General Motors subsidiary. The Chinese bought that in 1995. In 2002, Mountain Pass, which has reemerged now, but back then was one of the world's most successful producers of rare earth elements, was closed down. And so, going into 2010, the monopoly had been established, and it was in 2010 when this incident took place in Japan — a Chinese shipping vessel and a Japanese Coast Guard vessel collided. The Chinese fishing vessel was sequestrated and impounded, and from that, the Chinese imposed this embargo of rare earth exports to Japan. Now, I should say at this point, the Chinese would deny that they ever did this, but clearly the Japanese felt they did and the pressure mounted on Japan, and the incident ended because the fishing vessel was released along with its captain. And so, Japan was seen to back down in the face of this embargo or threatened embargo. And this was really a warning shot to the world — or should have been a warning shot to the world — that global production that was dependent on rare earths was really operating on the compliance of the Chinese willingness to supply those rare earth elements.
Stewart Paterson
Roseanne Gerin: And after that 2010 episode, I think a lot of people assumed the rest of the world would scramble to build alternative supply chains, but that effort never really materialized. Why not in your view? And what lessons did policymakers learn from that failure?
Stewart Paterson: So, there was a spurt of activity, particularly in Japan, as one might expect, and the Japanese went down the route of enhancing investment in things like recycling. They invested overseas in some rare earth projects and sought to invest a lot in R&D, in terms of looking for substitutes and ways to circumvent the monopoly. But outside of Japan, really, there was a lack of momentum. And whether that's down to a lack of intent — I mean, remember, we were in the aftermath here of the Global Financial Crisis; Europe was going through the euro crisis — the execution never really got off the ground in terms of breaking this dependency. The lesson that people should take away from it, I think, or should have taken away from it, was that these problems, if left to fester, get worse. And as the scope of use of rare earths has risen with new products becoming available and advancements in sophistication, the dependency has become potentially more expensive. And so, it was really a missed opportunity because clearly, 15 years down the line, where we find ourselves now, we're not quite at square one again, but we are starting from a very low base.
Roseanne Gerin: Right. And since then, we've seen China use export controls on elements like gallium, germanium, graphite — all critical minerals with significant applications across various industries — and now permanent magnets. How does a resource monopoly become an instrument of economic statecraft in a more multipolar world?
Stewart Paterson: So, that's a really interesting question, and I think one of the key elements to China's recent policy moves has been to mimic US law in terms of the extraterritoriality that they've attached to export controls, whereby they're saying, “We're very happy to export these rare earth elements to a particular country under license.” But if you are then re-exporting them, even in minute quantities and even in some other product, then China wants to know about it and China wants to retain control of that. So, obviously, in a multipolar world where the Chinese might well want to differentiate between, say, exporting directly to the United States for some product that would end up in the military usage and exporting to, say, India for some sort of civilian usage, the Chinese, by mimicking these US secondary sanctions are quite capable of ensuring that the rare earths end up where they think they are. And of course, in doing so, and by forcing companies to comply with these restrictions, they themselves are harvesting huge amounts of very useful information about foreign supply chains and where these elements end up. So, it serves a double purpose as well in terms of them gathering more insight into the various supply chains outside of China.
Roseanne Gerin: So, fast forward to today. How are the US, the EU, and key allies now responding to this chokehold on rare earth elements and magnets?
Stewart Paterson: So, obviously, we've seen a lot of legislation passed. Broadly speaking, with critical minerals, critical raw materials — the terminology differs by geography — we've seen these alliances formed in terms of So, obviously, we've seen a lot of legislation passed. Broadly speaking, with critical minerals, critical raw materials — the terminology differs by geography — we've seen these alliances formed in terms of groupings aimed at guaranteeing supply chain consistency and resilience, which is all good, but it's really only been in the last year or so that we've actually seen checks starting to be written by state actors to try and back this up — these diplomatic and bureaucratic efforts — with hard cash. And so, that is gathering momentum, and it really has been in the last year that you've seen the United States, in particular, starting to take equity stakes in significant players whose intent is to produce indigenous supply chains. The catchphrase being “from mine to magnet”, is the way the US administration will look at it. And so, we are seeing action on this front. I think where I might have a slight criticism of it is whether these direct equity stakes are the right way to proceed, or whether some kind of direct subsidy based on production might be an economically more efficient way of doing it.
The second issue is about the level of cross-border collaboration because clearly, when you look at where earth deposits are, where refining capacity and processing capacity are most likely to be built, where end usage is, this supply chain is going to have to span continents. And a multilateral approach to breaking China's monopolistic grip here, I think, would be the most cost-efficient way and probably the fastest way — definitely the fastest way — of achieving this goal. So yes, there is action. Perhaps it's a bit fragmented, perhaps it's a bit slow, but we are starting to see money spent. So, the ball is rolling.
Roseanne Gerin: Right. And in your article, you mentioned new groupings like the Minerals Security Partnership and the G7 Critical Minerals Production Alliance. For listeners who haven't followed this, what are these alliances actually doing and are we seeing real projects on the ground yet, or mostly bureaucratic intent?
Stewart Paterson: No, we are seeing projects on the ground. At the last G7 in Canada, for example, the Critical Minerals Production Alliance announced funding for projects, and those projects were already embryonic, and this is putting some financial muscle behind them. So, we have moved beyond bureaucratic intent and into real action, and production is starting to ramp up, but there is a long way to go. And, obviously, markets are growing, so we're a long way from self-sufficiency.
Roseanne Gerin: Also in your article, you estimate that self-sufficiency in permanent magnets for the US and close allies is still at least a decade away, even though the warning signs have been there for about 15 years. What are the biggest bottlenecks that make speeding that up so hard — whether it's heavy rare earths supply, permitting financing, or simply surging demand from the energy transition?
Stewart Paterson: Those are all key factors, so let's take them in turn. In terms of permitting and the environmental side, environmental lobbying and delays in permitting — these were key elements in rendering the Western supply chain financially unviable in the first place. The truth of the matter is that rare earth refining is a messy business, and it is polluting, and society has to accept that that is a cost of self-sufficiency. There are lots of amazing products that come from rare earths, and there is a trade-off there. The heavy rare earth side is also a problem. China has these in abundance. Outside China — I mean in raw form, in ore form — they're geologically more scarce. They tend to be tied up in clay, a rich sort of earth. The extraction of them is more difficult. And so, the heavy rare earth side is problematic.
You are dealing with an industry that's growing 7% a year and potentially faster as we move into energy transition. So, over a 10-year period, the goalpost doubles. You've also got the issue of actually identifying accurately what the real usage of these elements is, what the real level of usage is, because while the US might import very modest amounts of refined rare earth elements or oxides, the US is obviously importing much larger quantities of these that are already embedded in products, be they magnets, or beyond that, wind turbines, solar, or smartphones. And of course, the magnets themselves are then embedded in these products. So, actually ascertaining what self-sufficiency looks like is also problematic. The combination of a growing market and this identification and quantification of the problem are further complicating factors. Financing has been an issue historically, and this is primarily because where the private sector, on its own, has gone out and tried to do the right thing in terms of expanding capacity — production capacity — under a profit motive. China, because it controls the prices of these things, has been capable of artificially suppressing prices. It'll boost supply, depress prices, drive potential rivals out of business, and then recoup their losses on the other side of that by charging higher prices. And so, the industry has been typified by high levels of price volatility associated with those efforts by China to preserve its overriding market position. So, all these issues have been problems. We do seem to be getting to grips now with the permitting issue, with the acceptance of the trade-off in terms of environmental degradation, but the demand is very heavy, and a comprehensive and large, heavy rare earth supply chain is still elusive, I believe.
Roseanne Gerin: You lay out two very different ways China could respond to the diversification push: Either flood the market to test the West's financial resolve or keep supply tight to maximize leverage. Which path do you think is more likely in the next few years, and what kind of leverage is Beijing trying to preserve?
Stewart Paterson: Beijing finds itself holding this sort of trump card, but it has a limited lifespan. The first route which they've historically used of flooding the market to try and force out competitors, I think that they will shy away from that this time because they, quite rightly in my view, judge the West’s determination to break this monopoly as being complete, and that the financial costs that they could impose by forcing prices down will be fairly limited in the grand scheme of things. The floor pricing commitments that Western governments will be making to producers outside of China will really not cost them that much money relative to the economic costs that would be incurred if they allowed the Chinese monopoly to remain. So, I think the second route of ensuring scarcity, trying to control who receives these, will be the preferred route. That gives China lots of leverage in terms of negotiating because as we've already seen, they have the potential to close down pretty much the entire car manufacturing industry, for example, by creating this scarcity and these shortages.
And so, they will be using that for leverage in negotiations with different trade partners, and what they're after with different trade partners will differ according to the partner. But clearly, China knows that it has its own trade dependencies that it's keen to circumvent and, wherever possible, immunize itself against them being weaponized against that. So, in some cases, that will revolve around energy supply. In other cases, the leverage will be used to try and maintain market access — asymmetric market access in many cases. In some cases, it might be used to try and facilitate intellectual property exchange. So, China has this card. It's got a limited lifespan, but it knows that for now it is in the king's chair, as it were. So, I think maintaining scarcity is the most likely strategy.
Roseanne Gerin: Western governments are now leaning heavily on industrial policy — equity stakes, cheap loans, floor prices — to establish alternative products. What does it take to make those new critical mineral supply chains not just resilient, but also commercially viable and environmentally responsible rather than dependent on permanent state life support?
Stewart Paterson: One answer is scale, so the amount of subsidy will reduce as these companies scale up. And to do that, there will come a tipping point where they need to be protected from Chinese competition. So, that's one point to make. The environmental aspect: I think that in most cases, they have been environmentally responsible in the past where they were operating, but that doesn't mean there isn't any pollution. And clearly, the secret there lies in technology — recycling being one key avenue that is being explored and will continue to be explored as recycling technology becomes better. But clearly, because the industry really hasn't existed in the West for 20 years or so, we are well behind in terms of the latest technology, which is monopolized by China and patented by China. Where China has put export controls on the exportation of that intellectual property, they're keen to maintain the leading edge in the production technology. So, that is really about investing in R&D and catch-up. So, I don't see so many industries that were wiped out by China, some because China had a genuine comparative advantage and they were the lowest cost producer come what may in the world, and therefore, it was right and proper that they disappeared and went to China. In many cases, of course, it was just China's scale and industrial policy that led to those industries disappearing. When they come back, they will be expensive to start with, but as scale ramps up, they will become more competitive. And if we can ensure a level playing field, in some of these cases, they can be profitable and not necessarily a burden on the taxpayer. But it does beg a point that we will come onto, I think, which is where do you draw the line here in terms of what is critical and what isn't.
Roseanne Gerin: Now stepping back from rare earths themselves, you end the article by talking about other critical inputs like neon gas that are byproducts of industrial processes no longer done at scale and in developed economies. What broader economic and security lessons should governments be drawing from China's trade dominance in these kinds of inputs?
Stewart Paterson: I think one of the key ones is that you don't know where the next dependency necessarily lies. We've got a whack-a-mole approach at the moment — where there's a problem, we use industrial policy to try and solve it. That seems to be the route we are going down. But without 2020 forward vision, you simply don't know what key products are going to develop next that will lead to dependency. And China has this sort of maximalist approach to manufacturing, by which I mean China is loath to shed manufacturing, even fairly basic manufacturing, because it sees the value in the holistic ecosystem that manufacturing produces. So, a breakthrough in one industry is transferable into other industries, and a pure technological breakthrough might have very wide applicability, and that they see the synergies between, say, rare earths, battery technology, electric transportation, and energy transition. And so, these overlapping economic ecosystems all operate alongside each other and become self-reinforcing.
And you mentioned neon gas, and that’s a great example. It’s crucial for semiconductor manufacturing, but it's a byproduct of smelting. So, if you don't smelt aluminum and or steel in large quantities using blast furnaces to pump oxygen into these, and it’s from the compression of the oxygen that you get neon gas. And so, in a bifurcated world where you don't have uninterrupted global supply chains because they're being weaponized, and if you don't have blast furnaces, you can't produce semiconductors. And that's not a connection that people would logically draw — not someone anyway, who has been committed to a neoliberal vision of globalization such that we've had for much of the last 40 years. And so, I think rather than scoping for what the next key dependency is, although that is important, understanding where our current dependencies lie is equally important, and I don't think we've scoped that correctly. I think the more important lesson, perhaps, is that treating manufacturing in a more holistic fashion and recognizing that a manufacturing base is a key component of national security is one of the key lessons that we should be taking away from this. And that, in the rare earth case specifically, when you do have a warning sign, you must act on it and not leave it 15 years before taking the plunge.
Roseanne Gerin: And linked to all that, you argue that a truly multilateral or at least plurilateral approach is essential because these supply chains will inevitably span multiple countries. Why can't the US or the EU simply go it alone with domestic industrial policy? And what does a geopolitically aligned trading system actually look like in practice?
Stewart Paterson: Those are good questions. I think if we look at the US as an economy, given where manufacturing is as a share of GDP and the dependence on manufacturing imports, realistically to rebuild that base on a relative basis to where it was prior to China's accession to the WTO, it's going to take the US 15 to 20 years to get back to that kind of relative position. And that's a long-time frame given how fast geopolitical moves are happening at the moment. Nor is the US self-sufficient in everything that it requires for the rebuilding of that industrial base. It will be dependent on the rest of the world for copper, as an example — a key example — and indeed heavy rare earth ores as well. So, there are good reasons why the US can't do this alone under any circumstances. Even if it were to try and pursue that, it would be much more expensive than going down a plurilateral route.
The EU simply, at the moment, just doesn't have the wherewithal to pursue this sort of strategic economic autonomy on a meaningful time frame. They're hopelessly dependent on Russia still for energy. And the industrial base in Europe is undergoing a second “China Shock” now that the US has put up its barriers and said, “Well, we are not going to see the rest of our industrial base being wiped out by overcapacity and Chinese exports.” Those Chinese exports are focused elsewhere, and other countries, too, of course, are pushing back against that flooding of their markets. So, a plurilateral approach will be cheaper, it'll be faster, and more efficient. And what does that look like? I think my tentative conclusion in the report is that it needn’t look much different from what the World Trade Organization looked like before Chinese accession.
The World Trade Organization, GATT, worked pretty well before a dominant non-market economy started to emerge. So, I don't see it as necessarily having to be that much different. Unfortunately, I think we might've moved beyond a position where that is rescuable and, therefore, I would see alliances of like-minded nations forming around critical industries and genuine supply chains spanning continents opening up. Now, clearly, I think the current US administration has made clear its frustration with the transatlantic alliance up to a point and is pivoting to the Western hemisphere and perhaps sees that as a self-contained economic zone. I would think that Europe has quite a lot to offer in the race to immunize like-minded countries against the weaponization of China's monopolistic position in manufacturing. And Asian allies, too. Taken together, the United States, Japan, Germany, and South Korea do have a dominant position or a near-dominant position in a lot of the technologies of the future. And so, that is a very good base to work off, a much better base to work off than just America alone, I would argue.
Roseanne Gerin: OK, great. Thank you for all that. Now, I'd like to zoom in on the very latest developments in US-China trade relations over rare earths. President Trump and Chinese President Xi Jinping met in South Korea in October to ease tensions over China's rare earth export controls. China's latest big concession was to delay the expanded export controls it had planned for October, but it kept in place an April licensing system that bites hardest on Western military users. How do you interpret that move, and how does it help Beijing look conciliatory while still keeping maximum leverage over US national security supply?
Stewart Paterson: I think it makes Beijing look conciliatory in the sense that they are prepared to supply rare earth elements for civilian use, provided they know where the products are ending up, which is not an unreasonable stance for a superpower to take or a big country to take. The US likewise restricts the usage of products to civilian applications. So, I think Beijing comes out of it well in that sense. But obviously, what they are doing here is demonstrating the complete degree of control that they have over Western supply chains that involve rare earth elements. And in doing so, collecting lots of information. When a German company wishes to apply for a license, they're having to supply detailed data about where these products are ending up, which is commercially useful to China. So, I think China, when it comes to rare earths, has the whip hand and will do for many years to come. So, we need to learn to live with this.
Roseanne Gerin: After that Xi-Trump meeting, we saw a spike in Chinese rare earth exports in November. Do you read that as China temporarily flooding the market to take the pressure off and maybe to undermine the business case for non-Chinese projects, echoing what happened after 2010?
Stewart Paterson: No, I don't think so. I think these exports can be pretty volatile. Anyway, there was clearly a need for restocking because people had run down their supplies during the disruption. Clearly, the supply chain in Europe was on the brink of collapse. So, no, I don't think that was a sort of preemptive move to flood the market. I think it was a function of supply and demand.
Roseanne Gerin: Also in October, Beijing floated a measure that would basically mirror Washington's Foreign Direct Product Rule — putting licensing requirements on foreign products that contain even small amounts of Chinese-origin rare earths, as you alluded to earlier. If that were fully implemented, what kind of compliance headaches and legal uncertainties would it create for manufacturers in allied countries?
Stewart Paterson: Well, the answer is a lot. I think here, this is what I was alluding to in terms of supply chain information that would need to be provided. It is China demonstrating the power of economic statecraft and it underlines the importance of breaking its monopoly, which again, I come back to: we've known about this for 15 years, and it's a tragedy that we are in this position where we are now.
Roseanne Gerin: China has also started targeting the “picks and shovels” of the industry — the technologies, equipment, and production systems used for refining and magnet manufacturing — not just the raw minerals. How effective is that strategy in locking in long-term dominance and in slowing Western efforts to build independent supply chains?
Stewart Paterson: Well, it certainly makes it more difficult. And China's not unique in this sense, right? Many countries throughout history, once they've established a dominant position in industry, try and delay the ability of other countries to catch up. I’m reminded of lace makers in Bruges who weren't allowed to leave the city for fear that their skills would be diffused throughout Europe. I think a whole load of them escaped to Nottingham, and that's where the Nottingham lace industry materialized from. Closer to home, obviously, it’s semiconductor design, for example. The US is not keen for US software design, semiconductor design software, to permeate out of the United States. As you rightly say, the Chinese are imitating US legislation, the Foreign Direct Product Rule, here in terms of their extraterritorial control of where the product ends up. And they're trying to safeguard their intellectual property that they've built up over the decades in the technology around refining and processing and magnet manufacturing.
Western multinationals were not so careful when they engaged with China and were induced to give away a lot of their intellectual property, either by coercion or out of greed to access the China market. The Chinese have tighter control over their economic agents, their corporate sector. I suspect the Chinese will be more successful, potentially at keeping hold of their intellectual property pertaining to rare earth refining. But necessity is the mother of invention, and there are Western breakthroughs and people, particularly in the recycling area, designing processes that will improve the efficiency. And so, China might hold things up a bit with their safeguarding of their own intellectual property, but I don't think it's going to in any way prevent Western countries from achieving self-sufficiency. It might just slow it up a bit and make it more expensive.
Roseanne Gerin: We're also seeing control spread beyond rare earths to things like artificial graphite for electric vehicle batteries and high purity silicon for semiconductors. Does that signal a broader geopolitical strategy to reinforce chokeholds across the whole high-tech and energy transition economy rather than treating rare earths as a one-off case?
Stewart Paterson: I think we have definitely entered an era of geoeconomic competition in which trade dependencies are weaponized and in which powers are looking to flex their economic muscles and use their strength to shape the world to their advantage. And China, having taken on this mantle of the factory of the world, finds itself in a very strong position — has put itself deliberately in this very strong position — of having at least an oligopolistic grip, if not a monopolistic grip, over large areas of very important manufacturing, which are crucial for other countries — critical national infrastructure, for energy transition, and for a whole range of objectives. And, clearly, China is flexing its muscle at the moment and demonstrating that as things stand, the world needs it. The flip side of that is that what they're also doing is inducing policy responses, and those countries that react fastest and execute on policies the best will find themselves in strong positions, too, as the alternative supplier. At the moment, I think the US is certainly leading the EU in terms of taking these trade dependencies seriously and implementing action.
Roseanne Gerin: On the US side, Washington still depends heavily on China for rare earth imports, but the Trump administration recently signed a major deal with Australia to boost mining and processing projects. How much does this agreement change the picture, and how difficult will it be to build similar partnerships with other allies?
Stewart Paterson: It does change the picture. It's important to see Washington reaching out to other countries with expertise, particularly like-minded countries. So, this is important. I think the proliferation of these sorts of groupings has the potential to obscure strategic clarity, if you like. It might be better if there was one all-encompassing grouping amongst US allies rather than rival ones. But who knows? The sort of EU’s grouping, the G7, and NATO, all this competition maybe will work in terms of speeding things up. But clearly, Lynas, an Australian company, although largely operating out of Malaysia, has been the leader in rare earth refining outside of China for a while now. Canada has a lot to offer also in terms of critical minerals more generally, and building short, like-minded supply chains in critical minerals. So, I think the moves by Washington, Australia, and Canada are good moves.
Roseanne Gerin: China’s one-year pause on the expanded export control for rare earths offers a small window of relative stability. But if you were advising the US government, what concrete steps would you prioritize in that window, whether that's coordinated strategic stockpiles or clear allocation protocols for defense or targeted support for specific projects?Roseanne Gerin (46:52):
On the US side, Washington still depends heavily on China for rare earth imports, but the Trump administration recently signed a major deal with Australia to boost mining and processing projects. How much does this agreement change the picture, and how difficult will it be to build similar partnerships with other allies?
Stewart Paterson: It does change the picture. It's important to see Washington reaching out to other countries with expertise, particularly like-minded countries. So, this is important. I think the proliferation of these sorts of groupings has the potential to obscure strategic clarity, if you like. It might be better if there was one all-encompassing grouping amongst US allies rather than rival ones. But who knows? The sort of EU’s grouping, the G7, and NATO, all this competition maybe will work in terms of speeding things up. But clearly, Lynas, an Australian company, although largely operating out of Malaysia, has been the leader in rare earth refining outside of China for a while now. Canada has a lot to offer also in terms of critical minerals more generally, and building short, like-minded supply chains in critical minerals. So, I think the moves by Washington, Australia, and Canada are good moves.
Roseanne Gerin: China’s one-year pause on the expanded export control for rare earths offers a small window of relative stability. But if you were advising the US government, what concrete steps would you prioritize in that window, whether that's coordinated strategic stockpiles or clear allocation protocols for defense or targeted support for specific projects?
Stewart Paterson: It’s all of the above. But clearly, with stockpiling, the responsibility of that lies not just with the state. I think one of the issues for private sector actors — users of these magnets and rare earths — is that they've been so addicted to just-in-time inventory management and that needs to be replaced with a just-in-case approach to inventory management, particularly for these critical minerals, which are so vulnerable to geopolitically induced supply chain shocks. So, stockpiling is one, but clearly, it has to be full steam ahead. And I also wouldn't put too much faith in the one-year pause. China has the ability to go slow on the licensing. At the end of the day, this is a piece of paper. It’s not in any way, I think, a strong commitment. And I think I'm right in saying that China did not go back on its licensing requirements. It was just the very latest export controls that it agreed to put on hold for a year. So, it doesn't really change very much. But if there is sufficient supply in that window and that window stays open, then clearly stockpiling is prudent.
Roseanne Gerin: So, before we wrap up, I want to ask about how all of this should be covered in the media. For foreign correspondents covering US-China trade and the rare earth sector more broadly, what are the biggest pitfalls or common misunderstandings to avoid when reporting on China's export licensing and extraterritorial controls?
Stewart Paterson: To me, the main pitfall is not to confuse rare earth ores with processed and refined products and the end-product magnets. You often see people talking about where rare earth ore reserves are in the world, for example. That is not really how China cultivated its monopoly. China cultivated its monopoly by dominating the intermediate processes. So, I think that's the most common sort of journalistic shortcoming that I've come across. The other thing is that licensing is not the same as an embargo, but the licensing process is obviously at the behest of the Chinese state. And so, the Chinese state reserves through that the capacity to control supply. There is no guarantee that because you got a license before, you'll get a license again. So, the rollback, the one-year moratorium, or whatever, that doesn't mean that the issue disappears for a year at all.
Roseanne Gerin: And when journalists try to gauge whether diversification is actually happening beyond big press releases, what concrete metrics or milestones should they track, say for example, around the 25 projects highlighted by the G7 Critical Minerals Production Alliance and similar initiatives?
Stewart Paterson: You should go straight to the companies, to be honest. MP Materials would be a good one if you were trying to track US magnet production, because the companies have an incentive to tell you where they're listed. Particularly, they have an incentive to tell you what their progress has been. Lynas, of course, is also listed. The listed companies will provide you with pretty much quarterly updates on where they are. They will also provide you with updated market assessments because obviously they are right at the coalface in terms of supply-demand imbalances, etc. So, companies are a very good source of information for that.
Roseanne Gerin: Right, and your report highlights vulnerabilities that most audiences rarely see. For example, going back to neon gas as a byproduct of industrial processes no longer carried out in advanced economies. How can journalists tell these kinds of hidden dependency stories in a way that's both accurate and engaging for a general audience?
Stewart Paterson: There's not an easy way to find these, but I think one of the issues has been that, because of the sophistication of the products people use in the modern age, and the enormous number of components and inputs that go into just what we consider to be the most fundamental products in our life, like a smartphone in our pocket, we've never really lived in an age like that before. And I think one of the things that perhaps is missing from the discourse around our consumption patterns in the material age in which we live is just how precarious these supply chains are, and bringing that to life and all these obscure elements, products, gases, whatever, that are just fundamental to your ability to use your phone as a payment device or for any function. I think that would be a great gift for journalism and a good gift to the population to make them aware of this.
Roseanne Gerin: And finally, beyond the Hinrich Foundation, what public agencies, datasets, or government reports would you point journalists to if they want solid, up-to-date information on rare earth supply-chain diversification, especially around heavy rare earth sources outside China?
Stewart Paterson: CSIS has a very good program on critical minerals and rare earths, so I would definitely use their website. That's all free and publicly available information. Rare Earths Exchanges is another organization that is more market-driven, and it has a particularly good news section on developments in the critical mineral industry. The government agencies, both in Europe — and I mean Europe in the broadest sense, not the EU, but European countries and also the United States itself, produce good research on where we stand. It would've been great if they'd been doing that 10 or 15 years ago. But now that people have grasped the nettle, as it were, and seem to understand the critical nature of this, there is a plethora of good state-driven sources. So, information is not that hard to come by if you look for it.
Roseanne Gerin: Well, Stewart, thank you so much for sharing such sharp insights into the rare earths challenge and the bigger lessons on economic security.
Stewart Paterson: Well, thank you very much for having me on the podcast.
Roseanne Gerin: Right. And to our audience, thanks for listening. I'm Roseanne Gerin, and this has been The Foreign Press Podcast, brought to you by the Association of Foreign Press Correspondents in the USA, in partnership with the Hinrich Foundation. AFPC-USA is solely responsible for the content of this episode.
