The US Defense Establishment Is Tied Inextricably to China

This might be old hat to others, but this morning I read a fascinating and eye-opening Businessweek article on the intricacies of defense acquisition for the Pentagon and how much of the essential components required to operate critical equipment -- from submarines to tanks to laser-guided smart bombs -- come from China.

In particular, China produces 97% of the world's supply of so-called "rare earth" elements, including neodymium, yttrium, dysprosium and 14 others, which have long been recognized as essential to the development of defense equipment ranging from helicopters to tank guns to missiles. These elements are bought by defense contractors who work with the US Department of Defense, including Boeing, General Dynamics, Northrop Grumman and Raytheon. According to Brett Lambert, director of the Pentagon's Office of Industrial Policy:

The department has long recognized that rare-earth elements are important raw material inputs for many defense systems and that many companies in our base have expressed concern regarding the future availability of the refined products of these elements.

That concern over future availability is driven by a recent hike in export quotas and taxes, which are driving up prices and making acquisition more costly for US defense contractors. Yet there aren't many other options: at present, it would take about 15 years for the US to rebuild a rare earths manufacturing supply chain of its own.

This means that in the meantime, the ability of the United States to defend itself through all three legs -- land, air and sea -- is contingent upon its continued cooperation with its largest economic rival.

In related news, the Global Security Newswire reported just earlier today that the US and China are looking to renew military ties -- an interesting juxtaposition that underlines the intricate web of government military interests and those of private-sector contractors, all within the context of international business and global politics and economics.