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China’s Strategic Control Over Critical Mineral Markets and the Global Response

In a global context marked by increasing geopolitical tensions and intensifying competition for resources, the decision taken in December by the People’s Republic of China to impose restrictions on rare earth processing technologies represents a further step in its long-term strategy aimed at controlling the markets for critical minerals. These elements are essential not only for the production of high-tech goods, such as devices for renewable energy and defense systems, but are also central in international power dynamics, being classified by the United States as “critical minerals.”Historically, China has exploited its dominant position in the rare earth sector to influence international policies and exert economic and political pressure on countries dependent on these resources, as demonstrated in 2010 during the conflict with Japan over the Senkaku Islands. Japan’s dependence on Chinese minerals pushed Tokyo to diversify its sources of supply, a lesson that Washington seems not to have fully assimilated yet, despite the apparent risks.The increasing aggressiveness of China in the Indo-Pacific area and the more confrontational policies adopted by the Trump and Biden administrations have, however, pushed the United States to undertake concrete actions in terms of mining policy. Among these, significant investments stand out in mining, processing, recycling, and the development of alternative materials at the national level. Despite these initiatives, mining alone is not enough to meet the American internal demand for critical minerals, making it imperative for the USA to seek solutions through “friendshoring,” i.e., the integration of politically stable and allied countries into the supply chains.Under the current Biden administration, there has been a strong impetus to sign both bilateral and multilateral agreements to strengthen trade alliances in this sector. Significant examples of these new policies are the historic agreement with Japan on critical minerals and attempts to negotiate similar agreements with Indonesia and the European Union. These efforts represent concrete attempts to reduce dependence on Chinese supplies and to build more resilient and secure supply chains.Let’s go into detail.The Agreement between Japan and the United States on Strengthening Critical Mineral Supply Chains, signed on March 28, 2023, establishes a commitment to strengthen and diversify supply chains for critical minerals essential for clean energy and electric vehicle batteries, particularly cobalt, graphite, lithium, manganese, and nickel. The Agreement emphasizes the importance of promoting fair trade, environmental protection, workers’ rights, and sustainable sourcing of these minerals. Key points of the Agreement include:Prohibition of import restrictions or export duties: The Agreement emphasizes the need to promote national treatment, fair competition, and market-oriented conditions in the trade of critical minerals.Environmental sustainability of supply chains: The Agreement focuses on cooperation on international standards for labeling and recycling of critical minerals. The parties also commit to assessing the environmental impacts of critical mineral projects, promoting economically circular and resource-efficient practices, and implementing multilateral environmental agreements.Workers’ rights: The Agreement obligates both parties to uphold workers’ rights and enforce labor laws. This includes preventing forced or compulsory labor, child labor, and discrimination. The parties will collaborate to investigate and address violence against workers, protect migrant workers, and promote gender equality and labor protection with protected leave. Additionally, they seek to discourage goods produced using forced or compulsory labor and will cooperate in identifying and deterring such goods.Cooperation and information sharing: The Agreement encourages cooperation and information sharing to address violations of workers’ rights in critical mineral supply chains and promote due diligence. Each party will establish a national advisory or consulting body on labor for public input on issues related to the Agreement.Stakeholder consultation: Stakeholder consultation is recognized as important in trade policy related to critical mineral supply chains, and both parties will cooperate to ensure secure, sustainable, and fair supply chains.Security exception: The Agreement includes a security exception that allows the parties to protect their essential security interests. It underscores the intent of the parties to implement the Agreement in accordance with their laws and resources.The expansion of “friendshoring” policies is a strategic move that could provide tangible benefits thanks to existing American legislation, such as the Inflation Reduction Act of 2022, which offers tax incentives for the use of alternative-sourced critical minerals. This model not only serves American interests but could also become a reference point for other nations seeking to emancipate themselves from Chinese dominance in critical resources.

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