Neodymium is displayed at the Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. factory in Baotou, Inner Mongolia, China, on Wednesday, May 5, 2010. A generation after Chinese leader Deng Xiaoping made mastering neodymium and 16 other elements known as rare-earths a priority, China has cornered the market, with far-reaching effects ranging from job losses and global trade to U.S. national security. Photographer: Nelson Ching/Bloomberg
China is rich in rare earth metals, giving it an edge on technological development © Bloomberg

For those who have long warned about a growing US dependence on Chinese supply chains, Donald Trump is their moment in the sun. Last month the US president ordered a review of the country’s defence supply chain, claiming it faced gaps due to a loss of manufacturing jobs over the past decade. Only one company in the US can now repair propellers for Navy submarines, his administration said.

Rare earths, 17 elements that are used in magnets for wind turbines and electric-vehicle motors, as well as in military lasers and missiles, are core to the debate, since China has an almost complete monopoly over their supply. “The Middle East has oil, China has rare earths,” former leader Deng Xiaoping declared in 1992.

Sellout tells the story of how China has used its rare earth monopoly to capture the broader technological supply chain in order to get “a tight grip on the beating heart of American enterprise”. For Victoria Bruce, globalisation has put America at risk and made the country vulnerable.

The book argues that the US willingly offered up its technology, starting in the free-market heyday of the 1990s as one multinational corporation after another moved into China, believing they would have access to its growing domestic market. China realised it could obtain foreign military and industrial technology by buying it, licensing it or forcing foreign companies to do joint ventures.

Then China turned the screws on foreign companies by cutting them out of government contracts. Its domestic companies, and often those with links to Communist party leaders, got very rich. The book details the example of former president Jiang Zemin’s son, who it alleges pioneered a thorium-based nuclear reactor after an approved visit to the US Oak Ridge laboratory where the technology had been developed decades earlier.

Book Cover Sellout

Sellout aims to provide validity to the Trump administration’s concerns over China. It details key examples of US capitulation. These include Magnequench, a company that began as part of General Motors, which in the 1980s commercialised a new powerful rare earth magnet. These magnets helped usher in “a technological revolution at breakneck speed”. In 1995 Magnequench was purchased by two sons-in-law of Deng Xiaoping. It was supposed to stay in Indiana but later moved its technology to China. Ms Bruce lays the blame on a Washington in thrall to the free market, which relaxed controls on exports of sensitive technology.

Interweaved with this narrative is the book’s main character Jim Kennedy, your perfect hard-drinking Irish-American. He becomes aware of China’s rare earth monopoly after he buys an iron ore mine that has substantial deposits of rare earths. That sets him on a crusade to Washington.

His solution is a rare earth co-operative to be funded, owned and operated by end users — giant companies such as Boeing and Apple. It’s a model we are told worked for the US semiconductor industry when it faced tough competition from Japan. Fond of cowboy boots, Mr Kennedy is presented as a self-taught outsider challenging the reckless American government on the dangers of China.

The book makes some powerful arguments about how China obtained foreign technology and caught up with the west. But Sellout fails to make a full case for Mr Kennedy’s ideas. For the military, having supply of these strategic rare earths makes sense. But is a homegrown supply necessary? The book does not explain how having access to the raw materials would spur a technological renaissance.

It is also let down by its central character who starts with promise but never manages to escalate the “fight” of the title. Ms Bruce tries to paint Mr Kennedy and his lobbying sidekicks as “superheroes” as they walk the marble hallways of Washington but it is an image that fails to resonate.

And while the author is compelling on China’s strategic motives, the book lacks nuance. Many foreign companies were willing to hand over technology because they believed they could innovate faster at home. Nor has the US fallen out of the race. This is the country that saw the Tesla Model 3 roll off the production line last month, a mass-market electric car coveted in China. America may not have lost its technological soul just yet.

The writer is the FT’s commodities correspondent

Sellout, How Washington Gave Away America’s Technological Soul, and One Man’s Fight to Bring It Home: by Victoria Bruce, Bloomsbury $28

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