Opinion: US must alter policies to keep up with China

China’s dominance of critical materials used to produce everything from advanced weapons systems to electric vehicles and solar panels is a problem so glaring both the Trump and Biden administrations have singled it out as an economic and national security threat in need of immediate action.

The U.S. Geological Survey says that in 2020 imports made up more than one-half of U.S. consumption for 46 minerals, and the US was 100% reliant on imports for 17 of those.

China, our biggest competitor in world trade, supplies more than half of the minerals, including rare earth elements, which are critical components of F-35 fighter jets and advanced electronic and energy products touching every corner of the U.S. economy.

America hasn’t been this vulnerable to foreign sources of critically important commodities since it endured an economy-crushing oil embargo by petroleum producers in the 1970s. Then, as now, heavy reliance on imports led to a loss of factories, competitiveness, and the outsourcing of jobs.

President Biden has directed his administration to conduct a review of key supply chains, including those for the automobile and semiconductor industries, with particular focus given toward critical minerals. What the Biden administration must recognize is that this challenge cannot be met with a few turns of the dial, it will require an overhaul of policies that touch mineral and energy policy as well as trade and tax policy.

Without decisive action, America’s troubling mineral import reliance is likely to only grow in the years ahead with increasingly dangerous consequences for U.S. manufacturing, our ability to compete for the industries of the future, as well as our national security. In other words, the scale of the challenge mounted by China is so vast it requires help from the government in the form of a national industrial policy.

Emblematic of the challenge - and the need for action - is the accelerating pivot toward electric vehicles. We rely heavily on China for the so-called battery metals needed for EVs -- lithium, nickel, cobalt, graphite, and copper. Also, rare earths. There’s a serious risk in this. Apart from the leverage that China would gain over global auto sales, there is a matter of growing international competition for battery metals that could cause prices to soar and lead to shortages.

The World Bank predicts that as the manufacture of EVs ramps up around the world, global demand for lithium could rise 1,000% by 2050. Cobalt, 300-800%. Nickel, 500%. Other studies estimate that the mining of indium, a mineral used in fabricating electricity-generating solar semiconductors, will need to increase as much as 8,000%. And growing demand for rare earth minerals is likely to drive prices of those critically important materials sky high. Without secure and stable supplies of minerals, U.S. manufacturers won’t be able to do much about bringing on low-carbon technologies or competing against heavily subsidized Chinese competitors.

China makes no secret of its plan to dominate global minerals production for geopolitical purposes. China will do what it can to enhance its position, whether by buying up valuable mineral deposits in other countries or by using the threat of embargoes to intimidate U.S. manufacturers and hamstring U.S. foreign policy.

China’s success in controlling the supply of minerals depends in large part on America’s reaction to the challenge. What would effective industrial policy to counter this threat look like? It will require a balance between increasing domestic industrial competitiveness through reducing duplicative and unnecessary regulatory barriers while also providing strategic support to critical industries to create market signals capital can follow.

For example, we must modernize the mine permitting system. The United States has the most cumbersome system in the world, with overlapping requirements. It can take up to 10 years or more for a mining company to obtain a permit. We can and must do better.

Second, provide tax credits for mining companies that bring jobs back to the United States, investing in new domestic production.

Third, require U.S. government agencies to purchase American-made products and include mined-in-America under the made-in-America umbrella. These are but a few of the ideas that will be needed to right the stip. The European Union is already moving quickly to provide strategic support to encourage investment in European battery production and the development of key mines. There’s not a moment to lose to build a comparatively robust American industrial policy to ensure we don’t fall further behind.

Jim Constantopoulos is a geology professor at Eastern New Mexico University. Contact him at:

[email protected]