Rare-earth elements (REEs) are generally considered to comprise 15 to 17 chemical elements and are used in a wide variety of manufactured goods, from automobiles and fluorescent lights to precision-guided missiles and windmills. China now dominates production of REEs, and access to them and price have become major issues. Policymakers are not paying nearly enough attention to what is a significant problem.

The United States for many years was a leading producer of REE ores and refined products. Despite the commonly used name, these elements are not rare and can be found in most metals-producing countries. The United States dominated global production following World War II until the 1980s.

A series of circumstances in the 1970s and 1980s -- mainly the economic slowdown after two oil shocks; the collapse of the Soviet Union and release of some of its stockpiles; and opening of new mines in South America, China and Australia -- led to lower prices for REEs. Combined with significant environmental issues surrounding the mining and refining of the various elements, U.S. production began to wane. The rise of Chinese industrial might, together with relative indifference to environmental issues, gradually allowed China to increase its production, which further undermined the economics of U.S. producers.

China now controls over 95% of global REE production, giving it "market power," according to a 2010 Government Accountability Office report. As global economic demand grew, prices for some of these materials increased by 200% to 900%. China has cut its export quotas in half since 2005, and increased export tariffs by 15% to 25%, putting foreign users at a major competitive disadvantage.

In the advanced industrial economies, REEs (most of whose names I cannot pronounce) have become critical to a number of important industries, and the restricted supply is a cause of growing concern. The U.S. Department of Energy recently issued a report on the importance of REEs to the clean-energy technology industry. High-efficiency electric motors, the magnets that go into wind-energy systems, photovoltaic solar cells and lithium batteries used in hybrid cars all are dependent on REEs. Major automakers, especially Toyota but including General Motors and German firms, are so concerned about supply and price that they are investing substantial resources in developing motors that don't require REEs. Other industries, such as fiber optics, communications and computers, also are concerned about price and supply.

The U.S. Department of Defense, too, has begun to show concern, as REEs are important components in radar systems, precision guidance systems, avionics, satellites, night-vision equipment and communications.

The good news is that the United States and long-standing allies such as Canada and Australia have ample supplies of REE ores. The bad news is that the mining and processing of these elements requires enormous capital investment and technical expertise that needs further enhancement. Opening new mines and refineries could take as much as 15 years, although restarting an important California mine will take much less time. It is encouraging that multiple U.S. agencies are now studying policies needed to address the problem, and capital markets are beginning to validate the economic potential of this industry. But we are far from having an effective set of policies to assist U.S. industry in meeting the challenge. A few steps that could be taken include:

1) Simplify and accelerate the regulatory process for new facilities.

2) Support research into alternatives to REEs in the manufacturing of important products such as engines, batteries and communications equipment.

3) Take a very serious look at the national security implications of sourcing REEs from China (or Russia) and develop alternatives specifically tailored to the needs of our national defense.

4) Work more closely with our allies such as Canada, Japan, Australia and South Korea to coordinate approaches to the supply problem. These could include more sharing of research into alternative technologies and verifying that China meets its obligations under the rules of the WTO to refrain from using its dominant position for national advantage.

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