China is planning to ban exports of technology for refining rare earth minerals. Such a move, if taken, is likely to backfire even more spectacularly than its previous attempts to weaponize the trade in rare earths itself.
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In 2010, a dispute between China and Japan over which country owns a group of islands off the northeast coast of Taiwan caused Beijing to impose export restrictions on all 17 rare earths. That was a problem for Japan, which depends on elements like neodymium, dysprosium and terbium as essential components of equipment such as motors, LEDs, lasers and fuel cells. At the time, China had a near monopoly of the world’s production of the metals. Without alternative sources of supply, Japan’s hi-tech industry would be crippled.
There was a big lesson from that crisis: Given Beijing’s willingness to use rare earths as a geopolitical weapon, source diversification was an absolute necessity.
Japan Oil, Gas and Metals National Corp. or Jogmec, a state-owned enterprise set up to guarantee the country’s access to essential materials, funded Australian producer Lynas Rare Earths Ltd. at well below market rates to encourage the creation of a non-Chinese supply chain.
Thanks to that investment, Lynas now produces nearly 20,000 metric tonnes a year of rare earth oxides from its Mount Weld mine in Australia and processing plant in Malaysia, more than enough to meet all of America’s demand let alone the 500 tonnes or so needed for defence-critical applications.
Last month, it signed a contract to build a new facility processing 5,000 tonnes a year of rare earths in Texas, jointly funded with the US Department of Defense. The Pentagon also last year helped fund a series of other projects to guarantee more processing in the US, including from the large Mountain Pass mine in the Mojave Desert where listed MP Materials Corp. operates.
The result of all this has been dramatic. From 98% of global mined production in 2010, China’s market share had fallen to 58% by 2020. Mount Weld and Mountain Pass alone now account for nearly a quarter of global rare earths supply.
Meanwhile, the US Pentagon also set up a government stockpile of rare-earth elements analogous to the US strategic petroleum reserve, and announced plans to buy about 5,000 tonnes last year. Separately, major importers brought and won a case against China at the World Trade Organization over rare earths, as well as tungsten and molybdenum, two other elements where it had an outsize share of supply.
Occasional sabre-rattling over the past year has already driven up the valuations of non-Chinese producers, making it even easier for them to fund expansions of mining and processing capacity. Lynas last August raised $335 million, selling new shares to pay for a processing facility in Australia and upgrades at its Malaysian plant. The market capitalization of MP has surged more than tenfold since it went public via a SPAC deal last July.
Nothing about this turn of events should surprise anyone.
When Arab countries used their dominance of oil exports to push up the price of crude oil in the 1970s, the outcome was not a permanent Gulf stranglehold on energy, but a rush to diversify. Rich countries retired their oil-fired power stations and built coal and nuclear generators instead, while new wells were tapped in the North Sea, Siberia, Mexico and Texas.
When former US President Richard Nixon imposed an export embargo on soybeans shortly before the 1973 Arab oil embargo to help rein in galloping domestic inflation in the US, there was a similar outcome. Japan, which depended on America for about 92% of its soybean supply, helped establish a Brazilian industry to diversify its import base. It’s now the bigger global producer of such oilseeds.
The world depends on sprawling supply chains of scarce materials for a range of essential products, from electric vehicle (EV) batteries to fertilizer and MRI scanners. Most of the time, we pay little attention to the interdependency that’s built into these trade networks, because no player is reckless enough to damage its own position in the market by using it as geopolitical leverage.
As China itself is striving to demonstrate in the far more technically complex market for semiconductors, though, political restrictions on exports will only cause major importers to re-configure their supply chains to be more resilient. Beijing’s control of rare earths is as much of a paper tiger as it ever was.
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In a diverse country like India, where each State is socially, culturally, economically, and politically distinct, measuring Governance becomes increasingly tricky. The Public Affairs Index (PAI 2021) is a scientifically rigorous, data-based framework that measures the quality of governance at the Sub-national level and ranks the States and Union Territories (UTs) of India on a Composite Index (CI).
States are classified into two categories – Large and Small – using population as the criteria.
In PAI 2021, PAC defined three significant pillars that embody Governance – Growth, Equity, and Sustainability. Each of the three Pillars is circumscribed by five governance praxis Themes.
The themes include – Voice and Accountability, Government Effectiveness, Rule of Law, Regulatory Quality and Control of Corruption.
At the bottom of the pyramid, 43 component indicators are mapped to 14 Sustainable Development Goals (SDGs) that are relevant to the States and UTs.
This forms the foundation of the conceptual framework of PAI 2021. The choice of the 43 indicators that go into the calculation of the CI were dictated by the objective of uncovering the complexity and multidimensional character of development governance
The Equity Principle
The Equity Pillar of the PAI 2021 Index analyses the inclusiveness impact at the Sub-national level in the country; inclusiveness in terms of the welfare of a society that depends primarily on establishing that all people feel that they have a say in the governance and are not excluded from the mainstream policy framework.
This requires all individuals and communities, but particularly the most vulnerable, to have an opportunity to improve or maintain their wellbeing. This chapter of PAI 2021 reflects the performance of States and UTs during the pandemic and questions the governance infrastructure in the country, analysing the effectiveness of schemes and the general livelihood of the people in terms of Equity.
Growth and its Discontents
Growth in its multidimensional form encompasses the essence of access to and the availability and optimal utilisation of resources. By resources, PAI 2021 refer to human resources, infrastructure and the budgetary allocations. Capacity building of an economy cannot take place if all the key players of growth do not drive development. The multiplier effects of better health care, improved educational outcomes, increased capital accumulation and lower unemployment levels contribute magnificently in the growth and development of the States.
The Pursuit Of Sustainability
The Sustainability Pillar analyses the access to and usage of resources that has an impact on environment, economy and humankind. The Pillar subsumes two themes and uses seven indicators to measure the effectiveness of government efforts with regards to Sustainability.
The Curious Case Of The Delta
The Delta Analysis presents the results on the State performance on year-on-year improvement. The rankings are measured as the Delta value over the last five to 10 years of data available for 12 Key Development Indicators (KDI). In PAI 2021, 12 indicators across the three Pillars of Equity (five indicators), Growth (five indicators) and Sustainability (two indicators). These KDIs are the outcome indicators crucial to assess Human Development. The Performance in the Delta Analysis is then compared to the Overall PAI 2021 Index.
Key Findings:-
In the Scheme of Things
The Scheme Analysis adds an additional dimension to ranking of the States on their governance. It attempts to complement the Governance Model by trying to understand the developmental activities undertaken by State Governments in the form of schemes. It also tries to understand whether better performance of States in schemes reflect in better governance.
The Centrally Sponsored schemes that were analysed are National Health Mission (NHM), Umbrella Integrated Child Development Services scheme (ICDS), Mahatma Gandh National Rural Employment Guarantee Scheme (MGNREGS), Samagra Shiksha Abhiyan (SmSA) and MidDay Meal Scheme (MDMS).
National Health Mission (NHM)
INTEGRATED CHILD DEVELOPMENT SERVICES (ICDS)
MID- DAY MEAL SCHEME (MDMS)
SAMAGRA SHIKSHA ABHIYAN (SMSA)
MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME (MGNREGS)