China which halted shipments of rare earth minerals to Japan about a month ago, has now halted shipment of the same minerals to the USA and the EU. since China produces about 95% of the world's supply of these minerals, a halt in shipments from China will quickly dry up the world supply. The minerals have broad commercial and military applications, and are vital to the manufacture of products from cellphones to weapons systems. China claims that it is stopping these shipments as it curtails production to safeguard the environment, but most non-Chinese observers believe that China is trying to force non-Chinese companies to move their manufacturing facilities to China.
This embargo by the Chinese presents a difficult problem for Washington and the other Western nations. The US has deposits of the rare earth minerals in California, but the mines have low grade ore and have been shut down for the most part. Since the national defense of the USA is at issue, one would hope that the Obama administration would move away all restrictions to restarting these mines ASAP. There should also be a worldwide hunt for substitute mining sites where these minerals can be found as well as a program to find substitutes for them.
There is also the question of retaliation. After all, China keeps its currency at artificially low levels to insure that its manufactured products can undersell those of nearly all other nations. We the West to force a rise in the Chinese currency, it would be like the economic declaration of war. Imagine what happens if the Chinese stop buying US treasury bonds and put the ones they currently hold on the market. It would make the 2008 market meltdown look like a walk in the park.
Because the stakes are so high, there needs to be an educated and thorough investigation of this situation. Hopefully, Obama will not simply look at this through his ideological glasses. Literally, the fate of the world economy could hang in the balance.
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