There’s a lot of scary news about United States-China relations these days. Perhaps the scariest news is the realization that from healthcare equipment to essential minerals, many of the supply chains our national security and economy depend on are controlled by China. The COVID-19 pandemic has shown that America is in a vulnerable position.
For years, concerns over offshoring and China’s grip on critical industries were dismissed with arguments that cheaper products produced overseas were beneficial for consumers and businesses. That argument has now been questioned as the nation found itself short of ventilators, personal protective equipment, and drugs needed to combat the pandemic and not enough domestic manufacturing capacity to meet our needs.
As startling as the erosion of U.S. healthcare supply chains has been, U.S. dependence on minerals imports and China’s control of mineral markets is even more alarming.
We are completely import-dependent on 18 minerals and import-reliant on 50 minerals critical to the manufacture of strategic weapons systems and high-tech consumer products. Among the most important are lithium, a component of batteries for portable consumer electronic devices and electric vehicles, and rare earths, a class of 16 minerals crucial for defense systems such as night vision goggles, advanced military aircraft, and laser-guided weapons.
China dominates the markets for both lithium and rare earths. China or Chinese companies control key mineral resources around the world.
The Department of Defense uses 750,000 tons of minerals and metals each year, and an increasing amount comes from overseas. China is the sole supplier of many. Beijing has slowly been dominating the world production of key minerals.
Take lithium. Relatively little lithium is produced in China, but a Chinese company, Tianqi Lithium, effectively controls nearly half of the world’s lithium production. China has turned into the global hub for the processing of minerals, such as lithium, into the compounds that are then used in manufactured goods. It’s often the case that if you want access to essential minerals and metals, you might have to relocate your industry to China to get them.
What can be done to break China’s grip on minerals and do it without harming our economy?
Ramping up the mining of domestic resources is the obvious answer. After all, the U.S. is rich in minerals, with reserves estimated at more than $6 trillion. Why can’t the U.S. mining industry just do it? In large part, the answer is that self-imposed regulatory obstacles have made it so expensive and cumbersome to open a new U.S. mine, domestic mining investment has been eroding despite our vast mineral reserves.
Furthermore, U.S. manufacturers, fighting to stay competitive, have often turned to Chinese minerals and metals or relocated to China to obtain lower-priced inputs. In other words, we have disincentivized domestic production while failing to incentivize the establishment of homegrown supply chains.
Fortunately, there are two pieces of critical legislation aimed at both of these problems. The American Minerals Security Act would improve mine permitting and reduce unnecessary barriers to greater production. Obtaining a mine permit in the U.S. takes an average of seven years and often stretches past a decade. In Canada and Australia, countries with similar environmental standards, it takes just two to three years. We can do better. In addition, the Securing American Minerals Supply Chain Act would provide domestic manufacturers with incentives to use minerals produced here. Both pieces of legislation deserve strong bipartisan support.
Improving the competitiveness of the U.S. mining sector would provide a triple benefit: greater minerals security, more mining jobs and tax revenue, and a boost in manufacturing. Breaking China’s domination of strategic industries, such as mining, is a serious concern. China’s position keeps growing stronger while ours weakens. This is a predicament largely of our own policy failures; now is the time to take decisive action to fix it.
Mark J. Perry is a professor of economics at the Flint campus of the University of Michigan and scholar at the American Enterprise Institute.
