->The health crisis has re-launched a crucial issue in relations between the West and China: that of dependence, and vulnerability, of supply chain. Global interdependence, in these crisis contexts, risks becoming a double-edged sword. Especially in the sectors where Beijing has established iron control, as in the case of rare metals: it is the largest producer of 18 critical minerals, and almost monopolist (more than 70% of the market) of five other, including rare earths. To overcome this serious commercial asymmetry, the United States in the last year has launched a series of initiatives to find strategic and diplomatic countermeasures, as reported by Formiche.net.
Among the partners involved, the European Union, which has been committed to promoting its since 2008 Raw Materials Strategy, preferring policy to mitigate risks, diversify supplies, invest in research and development and ensure greater sustainability in supply chains. Josep Borrell, High Representative of the Union for Foreign Affairs and Security Policy, together with Thierry Breton, European Commissioner for the Internal Market, recalled in an article last Tuesday the stakes in the current crisis scenario, “especially in the face of growing tensions between the United States and China”. In this context of geopolitical competition, “the era of a conciliatory Europe, where not even naive, is over”, and requires to be “more resilient to better prevent and resist future shocks”, especially health ones. Not only that, since for the near future “essential technologies are also essential, certain essential raw materials (such as rare earths), the defense industry, as well as the media. Without isolating ourselves from our partners, without falling into the trap of protectionism, we cannot fail to equip ourselves with sufficient collective capacity to protect our values and our interests “.
Last November, the United States, the European Union and Japan updated their program plans on the challenges related to the supply and R&D of these strategic minerals at a conference held in Brussels and which involved the Ministry of Economy, Trade and Japanese transportation, the European Commission and the U.S. Department of Energy. Now in its ninth edition and destined to hold its tenth edition by the end of the year, the Trilateral EU-US-Japan Conference on Critical Materials in fact it represents a manifestation of the will to coordinate the countries involved in the framework of the Trilateral, to prevent scenarios such as that of 2010, when the rare earth crisis and the sudden rise in prices of the latter revealed to the world how China could make geopolitical use of its mineral resources.
For about a year now, the issue has become increasingly public in America, and which in all likelihood will be decisive in writing the future (and power relations) of the modern economy.
This awareness is certainly not lacking in some senators in Congress, mostly Republicans. Between these, Marco Rubio, a Senator from Florida and a member of the influential Senate Foreign Relations Committee. In an article that appeared in the magazine Foreign Policy on wednesday, the republican senator took a head on a question that has been animating for months policymaker Americans. “These rare metals, such as neodymium and dysprosium, feed everything from hard drives computers to smart missiles used to defend our nation. The United States has historically dominated its production, but we are now dependent on China which has established an almost monopoly on the extractive and productive industry thanks to decades of careful planning. This represents a growing threat to national security and a vulnerability to the American economy. “
Despite a series of proposals and initiatives, both at executive and legislative level, to try to face this reality, Rubio stressed the substantial “absence of a consensus on the policy to Congress “. In fact, in Capital Hill, in the last decade, ideas have not been lacking, but with discouraging results.
The numerous proposals submitted to the Senate and the House of Representatives, from Restart Act in 2010, passing through the Critical Minerals Act the following year, they never gained ground, falling by the wayside. At federal agency level, the Energy department had reacted with the Critical Materials Strategy in 2010, implemented in 2019 by the Commerce department with the Federal Strategy to Ensure Secure and Reliable Supplies of Critical Materials. Guidelines that offered some policy proposals and addressed some aspects, but without touching the heart of the matter: the important barriers to private investment in a sector characterized by high volatility and subjected to a series of risks (technological, environmental and politicians).
The latest legislative proposal, presented by the senator Ted Cruz last month, it set itself the goal of facilitating, with incentives and tax relief, the activities of companies in the mining sector. Recently also the Defense Department, through the executive order countersigned by the President Donald Trump last July, it undertook some initiatives to finance new projects, in order to guarantee one supply chain sure of important materials and components for the military industry. A step in this direction seemed confirmed with the announcement of the Pentagon in mid-April of an order to MP Materials, the only company operating on US soil. Except then retrace their steps, since the Californian company is 9.9% owned by the Chinese Shenghe Resources Holding Co. The direct competitor, the Australian Lynas Corporation (the largest rare earth producing company outside China) instead, he had to freeze the financing because of the opposition of some Republican senators, reluctant to finance a foreign company.
This series of failures, according to the Senator from Florida, are attributable to an approach business oriented that clashes with reality: at present there is no real free market for rare earths. This is because, having monopolized the main production and processing phases, “China now has total control over the prices of these minerals” thus being able to “take retaliatory action against any American actors who want to enter this crucial industry”.
Precisely for this reason, the United States must ensure collaboration in the industry “to mitigate this threat so that no company can be bullied by Beijing.” How? The thesis of the senator, who presented his project with the RE-Coop 21st Century Manufacturing Actis therefore also the one advanced by many experts in the sector. In an in-depth analysis, Keith Johnson is Robbie Gramer in fact, they raised some doubts about the effectiveness of the measures adopted so far, since they only encourage the opening of new extraction and production sites in the sectors upstream “It represents a market solution to a non-market problem”. The reason? Simple: China controls most of the manufacturing processes. Therefore, as it effectively summarizes David Uren in a reflection on The Strategist (Australian Strategic Policy Institute), “it makes no sense to produce non-Chinese rare earth oxides if it is then necessary to ship them to China to be transformed into metals and then into magnets”. In fact, the chains with the highest added value. Furthermore, as the Pentagon’s refusal has shown, “the biggest obstacle” remains what “governments (western, ed) they are not much more inclined to take on financial risks than the private sector. “
That’s why the proposal of Marco Rubio it could represent a turning point, at least in the US context. “It would help American companies that need these minerals by offering the opportunity to invest in a coordinated way on refining and processing processes, in convenient ways and by sharing profits”, with the aim of developing “a supply chain robust and integrated rare earth “and thus contribute to the ultimate goal,” defend, and in this case revitalize, industries vital for the national interest “.
However, there are further obstacles, mostly political ones. The extraction of rare metals is a highly invasive and dangerous activity for the environment, since extraction and refining phases require the extensive use of chemical agents. In the United States, the mining industry has collapsed in part due to the stringent environmental regulations of the 1990s that made the activity highly out of the market compared to the Chinese context. Today, as reported by the Washington Examiner, Democrats (especially the more environmentalist wing) are critical of a possible revival of the mining industry on American soil, and therefore remain a stumbling block for a consensus bipartisan to Congress.
The question remains open, on several fronts. Will the United States manage to build an independent mining industry? If so, how will this impact relations with Europe, with a view to contributing to a joint global governance of minerals? In the background, there remains one (and shared) concern: the Chinese monopoly. On the other hand, the differences in approaches that, for now, seem to emerge from the many Western initiatives must be filed.
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