Critical Rare Earths, National Security, and U.S.-China Interactions

A Portfolio Approach to Dysprosium Policy Design

by David L. An

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In recent decades, China has become the world's principal source of rare earths extraction, processing, and manufacturing of its derivative goods. China's monopoly is partly a result of its rich geological endowment, particularly of the "heavy" rare earths that are increasingly valuable in green energy and military technology applications. The country's rapid industry consolidation, however, has been abetted by unfair policies such as export restrictions that subsidized domestic producers. Furthermore, Beijing has indicated a tight-fisted disposition, intent on reserving its rare earths for domestic consumers and preferring that trade partners "find their own sources." This dissertation examines how the U.S. can pursue a portfolio of policies to reduce American vulnerability to the supply disruption of one critical heavy rare earth, dysprosium. Intended primary for U.S. policy makers, the study first provides a consolidated narrative of the interplay of politics, economics, and geology of rare earths in general and dysprosium in particular. It then systematically evaluates the effectiveness and costs of a roster of new and incumbent policies. A new strategic planning framework leverages mixed-integer linear programming to concoct policy portfolios that maximize U.S. resiliency to dysprosium supply disruptions at given budget levels. This enables a trade-off analysis comparing the portfolios' vulnerability reduction effectiveness against their costs. This analysis culminates with a recommendation of the portfolio that balances fiscal feasibility with acceptable vulnerability reduction. The hope is that the method and research findings will also serve as a generalizable template for mitigating the criticality of other vulnerable rare earths and materials.

Table of Contents

  • Chapter One:


  • Chapter Two:

    The Politics and Economics of Rare Earth Elements

  • Chapter Three:

    Applications and Geological Properties of Rare Earth Elements

  • Chapter Four:

    Dysprosium Supply and Demand Projections

  • Chapter Five:

    Methods for Policy Assessment and Portfolio Optimization

  • Chapter Six:

    U.S. Policy Options

  • Chapter Seven:

    U.S. Policy Strategy

  • Chapter Eight:


  • Appendix A:

    Military Applications of Permanent Magnets

  • Appendix B:

    Advanced Non-Chinese Rare Earth Projects

  • Appendix C:

    China, Just Another Brick in the Wall?

  • Appendix D:

    DoE Technology Readiness Level (TRL) Scale

  • Appendix E:

    DoE Commercial Readiness Level (CRL) Scale

  • Appendix F:

    Complete R&D3 Level Descriptions and Probabilities of Success

  • Appendix G:

    Selected Legislative Activity

  • Appendix H:

    H.R. 3304 FY2014 NDAA Excerpts

  • Appendix I:

    H.R. 761 National Strategic and Critical Minerals Production Act of 2013

  • Appendix J:

    CMI Research Focus Areas

  • Appendix K:

    CMI Research Publications

  • Appendix L:

    DMEA Trusted Foundry Program

  • Appendix M:

    The WTO Panel Process

  • Appendix N:

    Other Potential Contingency Plan Options

Research conducted by

This document was submitted as a dissertation in September 2014 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Brian Chow (Chair), Charles Wolf, Jr., and Deborah Elms.

This report is part of the RAND Corporation Dissertation series. Pardee RAND dissertations are produced by graduate fellows of the Pardee RAND Graduate School, the world's leading producer of Ph.D.'s in policy analysis. The dissertations are supervised, reviewed, and approved by a Pardee RAND faculty committee overseeing each dissertation.

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