Canada

The long-planned and carefully crafted meeting between U.S. President Joe Biden Chinese President Xi Jinping near San Francisco may have gone off without a hitch, and defense dialogues between Beijing and Washington may have been restored, but analysts are not entirely optimistic that re-opened lines of communications will ultimately resolve deeply-rooted disagreements between the two countries on a variety of issues.

One key point of contention was and is the global race for critical minerals, in the context of which the U.S. has taken steps to decouple from Beijing in the wake of pandemic-induced supply chain challenges, surging demand and rising trade and geopolitical tensions.  However, with China controlling much of the critical minerals supply chain, diversifying supply chains away from China is a daunting proposition given the complexity of value chains.

“The US attempt to pull away from China in the electric vehicle (EV) race is like navigating a road trip without a map, given the vast expanse of China’s routes through the critical minerals supply chain that is essential for EV battery production,” writes Sonja Cheung of the Asia Business Council in a new piece for the Hongkong-based South China Morning Post, adding that Washington’s efforts need to be more “assertive” to succeed.

Cheung points to the fact that while China owns most of the cobalt mines in the Democratic Republic of the Congo and has substantial lithium investments worldwide, the U.S. has so far  – while in talks with several other countries and the European Union “made just one trade deal, with Japan earlier this year.”  (A deal with nickel-rich Indonesia was inked after Cheung’s piece was released).

She argues that “to stand a realistic chance of countering China’s strong position in the EV market, Washington needs to double down on combining policy support, financial incentives and advances in technology, to reduce its reliance on imported materials.”

Concludes Cheung:

“The blueprint for accelerating the US EV industry is multifaceted – it involves not only extending tax credits but also installing a robust charging infrastructure across the nation and ensuring EVs are more competitively priced.

The US stands at a strategic juncture and investing in Canada’s abundant critical minerals supply could be a game-changer. As the world’s fifth-largest producer of graphite and nickel, Canada is not only a neighbour but also a natural ally with the potential to be a powerhouse in lithium, magnesium and rare earth elements – all vital in EV machinery. Strengthening this partnership could fortify North American supply chains and reduce reliance on China.”

To those of us used to asking Siri for directions, going on a road trip without a map sounds daunting, but this is one trip the U.S. cannot skip.  Thankfully, there are important pointers in the form of a comprehensive “all-of-the-above” approach the United States can use to navigate the road ahead, encompassing increased domestic production, permitting reform, recycling, R&D, and friend-shoring.  Of course, as is the case all too often, the biggest challenge ahead may be making it past the Washington, DC gridlock.

Amidst growing tensions between the United States and China, the United States is stepping up its friend-shoring efforts in an attempt to diversify its critical mineral supply chains. Recent trade deliberations with Japan and the European Union have yielded a free trade Critical Minerals agreement to strengthen supply chains with Tokyo and will likely lead to a similar accord between Washington, DC and Brussels.

Perhaps the most natural ally for the United States, is to our north – Canada.

Both countries have in recent years explored ways to partner up in their efforts to secure critical mineral supply chains, and have deepened and formalized their cooperation in this field in the context of the 2020 Canada-U.S. Joint Action Plan on Critical Minerals and various multilateral forums, including the Sustainable Critical Mineral Alliance launched at the end of last year, and the Minerals Security Partnership launched in June of 2022.

While many country-to-country communiques never make it past the bureaucratic boilerplate, the U.S.-Canadian relationship is “more than metaphorical” and “[u]nlike any of America’s other allies, Canada has long been part of a special relationship, linking the two country’s defense industrial bases as one” with the defense union dating back to the months preceding America’s entry into World War II, as ARPN’s Daniel McGroarty phrased it in a 2018 piece for Investors Business Daily. 

In a plea for greater bilateral critical minerals cooperation in the fall of 2021, former U.S. ambassador to Canada David Jacobson wrote in the Globe and Mail:

“We are in a race against time, and we cannot always count on the competition to play fair. Americans and Canadians have historically pulled together for the good of both nations in times of challenge. Such times are coming. Let’s once again plan for, face and beat this new challenge by together establishing our place in the global supply chain.” 

His call was echoed by U.S. Senator Joe Manchin (D-WV), who in the summer of 2022 suggested that the U.S.-Canadian energy and critical minerals partnership be strengthened “to ensure [the] free world’s energy security and address climate change.”

The bilateral partnership has been given a new boost with President Joe Biden’s visit to Ottawa last month, during which President Biden and Canada’s Prime Minister Justin Trudeau celebrated the two countries’ “progress under the Roadmap for a Renewed U.S.-Canada Partnership over the past two years and reaffirm our historic alliance, steadfast friendship, and commitment to overcome the daunting challenges of today and realize the full potential of the relationship in the future.”

The Joint Statement by President Biden and Prime Minister Trudeau specifically affirmed both parties’ commitment to creating “a strong, environmentally responsible and resilient North American critical minerals supply chain,” and the mutual goal of “identifying, securing and developing critical minerals extraction, processing, manufacturing, and recycling opportunities in both countries to diversify supply chains essential to clean energy, electric vehicles, semiconductors, aerospace, and defense, among other sectors (…).”

It further announced that the recipients of the $250 million of Defense Production Act Title III funding to mine and process critical minerals for electric vehicle and stationary storage batteries would include both U.S. and Canadian companies to be announced this spring.

With geopolitical tensions on the rise, the trade dimension of critical mineral resource policy is coming more and more into focus and the importance of building an integrated North American supply chain is increasing.  However, as ARPN and others have consistently argued, the United States cannot just rely on partners to meet U.S, critical mineral needs, the United States “also needs to contribute our part to a North American minerals alliance”, as Sen. Manchin phrased it.

As ARPN previously argued:

“Let’s do it. Let’s build out an integrated North American supply chain for critical minerals where possible — but let’s also not forget that closer cooperation with our friends and allies AND strengthening domestic resource development should not be considered mutually exclusive strategies.”

 

 

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