According to Scott, Margonelli and Appelbaum, by focusing on price alone, the U.S. allowed the market to determine the value of crucial components like rare earths.

Fortunately, a company is trying to re-open the rare-earths mine in California in the next couple of years, as market theory would predict. But in the meantime the delay will result in more harm to American manufacturing and a competitive advantage to the Chinese.

This story shows why trade policies toward China and industry in general need a serious re-examination.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.