Published: 3/25/2021 9:11:42 AM
Over the past two decades, in tandem with its steadily rising prosperity, China has emerged as an industrial power that can affect the shape of the world to come. While there are more similarities between the Chinese and American economies than some might imagine, one area that is profoundly different is industrial policy. China has one, the United States doesn’t.
American economic policy should refocus the United States on the national interest and the pursuit of key priorities. Economic security matters. It is in America’s interest to strengthen key industries. Yet many policymakers have always been uncomfortable with the notion of the government exercising such power. In recent years, a belief in the sanctity of the free market and a singular focus on short-term profits has led to outsourcing and supply chains stretched across the globe and a withering of the U.S. industrial base. The recent debacle leading to shortages of personal protective equipment at hospitals treating coronavirus patients showed that a totally free-market approach based solely on price can be counter-productive.
It’s easy to see the potential for worse problems. U.S. import dependence on the very materials that are so essential to advanced energy technologies has more than doubled in the past two decades. Half of the most critically important minerals and metals, including lithium, cobalt and rare earth elements, are now imported from China. In fact, China controls 85% of the world’s supply of rare earths, which are needed for weapons systems and high-tech consumer products – and that cannot be in America’s best interests.
China’s goal seems nothing less than monopolizing global production of materials. China is capable of disrupting supply chains on a grand scale, and its fits of anger affect millions of people. China sees its economic power as a powerful tool to deploy for political purposes. Furthermore, China is using its dominance of minerals and metals production to swallow the global industries that rely on them. The production of batteries for electric vehicles (EVs) is one, semiconductor chips is another.
Chinese policy makers have a keen understanding of the linkage between minerals security and economic growth. Take the importance of copper to the auto industry. Each EV battery contains about 90 pounds of copper. And the number of batteries coming off assembly lines seems to be growing by the minute. What’s more, copper is needed for many other products, ranging from weapons systems and high-voltage transmission lines to smartphones. The problem is that China has tightened its grip on the global production and processing of copper, in part by providing Chinese companies with the financial resources to purchase some of the most productive copper mines around the world.
Given the competitive threat China poses and the risk of higher commodity prices or even an embargo, bolstering U.S. copper production should be made a top priority. We also need to make sure that other critically important minerals such as lithium, nickel and cobalt come in large part from U.S. mines and are not imported from China or other hostile countries.
China’s stranglehold on the production and processing of minerals and metals cannot be allowed to continue. With a new administration in office, and with Congress sensitive to the risks of foreign dependence, we have a good opportunity to set a new course with an industrial policy that can provide far better minerals security.
President Biden has directed his administration to monitor the challenges facing the automobile and semiconductor industries, particularly their supply chains for critical materials. The U.S. must leave no stone unturned in rebuilding our industrial base and halting China’s industrial predation.
There’s no more important place to start than with the nation’s supply chains. Energy Secretary Jennifer Granholm has called for ramping up domestic production. The U.S. has vast mineral wealth that can be tapped to provide the resources for infrastructure improvements and a clean-energy economy.
Improving the competitiveness of U.S. industry can begin with steps to eliminate duplicative mining regulations and improve the permitting process for minerals production. But that alone won’t be enough to compete with China. There is also a need for incentives such as tax credits for U.S. manufacturers who use materials produced in U.S. mines. Made in America efforts must include mined in America.
The difficulty of mounting an industrial policy cannot be underestimated, but neither can the results. U.S. policymakers know that the United States must match the mobility and agility of China in the battle for global leadership. There’s not a moment to lose.
Howard Shaffer, a retired nuclear engineer, lives in Enfield.