Trade policy in an integrated global economy can take some unexpected twists and turns. Today’s post highlights returns to one development under discussion that could lead to a result diametrically opposed to the original intent, in this case, of the U.S. Congress and Biden Administration.
Earlier this month, in a letter to Biden Administration officials, U.S. Senators registered their concerns regarding media reports of a potential “limited free trade” agreement between the United States and Indonesia – sometimes dubbed the “nickel capital of the world” — on critical minerals in the context of the Administration’s effort to expand the number of countries to qualify for the tax credits afforded under the recently enacted Inflation Reduction Act (IRA).
Senators argued that forging ahead with negotiations with Indonesia without having developed a comprehensive accounting of domestic sourcing options, and the opportunities from countries with which the U.S. already has trade agreements, would “undermine the intent of Congress and undermine the jobs and futures of our workers.” (See ARPN’s earlier post on the issue here)
But that’s not all. Now a news story from Asian media examines whether such a pact might actually provide U.S. taxpayer-funded subsidies that would benefit Chinese mining companies. For a U.S. law meant to encourage U.S. resource development and reduce foreign resource dependence not least on China, it’s an unintended consequence, to say the least.
As Nikkei Asia picks up the story, the senators’ opposition is throwing “a wrench int the Biden Administration’s plans to host [Indonesian] President Joko Widodo at the White House this month, to coincide with the Indonesian leader’s attendance at the Asia-Pacific Economic summit in San Francisco.”
Nikkei cites North American mining industry representative Todd Malan who points out that “[t]he idea behind the IRA was that free trade agreement countries have high standards and was a proxy for saying ‘let’s build up a supply chain outside of China and to do it with allies that have free-trade agreements,” adding that “The point of the letter is to say that giving a free trade agreement to Indonesia is just a backdoor for Chinese companies and that U.S. taxpayers should not be giving a subsidy to Chinese miners in Indonesia.”
Indeed, Chinese companies are heavily invested in the country. Benefiting from long-standing relationships with Indonesia, they have “poured upwards of $14 billion into two ore-rich islands to lock in supplies for battery production,” according to Bloomberg reports.
Malan is chief external affairs officer at Talon Metals, a mining company focused on advancing U.S. domestic nickel projects which have been awarded federal funding in recent months – along with several other domestic projects for other battery and defense criticals. (See ARPN’s recent coverage here and here)
All of which underscores, as ARPN has previously pointed out, that “Critical Mineral resource development can begin at home, where political risk is low and environmental, labor and mine safety standards are high” – principles that should guide stakeholders when it comes to sourcing nickel and other Criticals, particularly as geopolitical tensions surge across the globe.
