National Security Adviser Says Critical Mineral Deals Could Extend to Mining Countries
The Inflation Reduction Act will encourage the building of "a clean energy manufacturing ecosystem, rooted in supply chains here in North America and extending to Europe, Japan and elsewhere," National Security Advisor Jake Sullivan said in a speech April 27 in Washington. "This is how we will turn the IRA from a source of friction to a source of strength and reliability."
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Sullivan, whose job would not usually be about trade relationships and industrial policy, echoed the sorts of themes U.S. Trade Representative Katherine Tai delivers in her speeches -- that globalization had downsides for U.S. workers and created overdependence on China, that focusing on lowering tariffs through free trade negotiations is the wrong question for the wrong moment, and that frameworks are better for addressing today's challenges.
Sullivan said that while the post-war economic order helped the world reach "new levels of prosperity," it also exported jobs, hollowed out the American manufacturing base, and, in destroying manufacturing towns, also damaged our democracy.
"This moment demands we forge a new consensus," he said.
Sullivan pointed to the global arrangement on steel and aluminum, a negotiation between the EU and the U.S. aimed at raising barriers in their respective markets for metals produced with non-economic overcapacity and metals produced less cleanly than their own production. "If we can apply it to steel and aluminum, we can look at how it applies in other sectors as well," he said. He said the U.S. wants to make sure competitors aren't gaining advantage by despoiling the environment.
He said "trade liberalization as an end in itself" is not what this administration believes in, especially since bringing China into the World Trade Organization didn't "incentivize them to adhere to those rules."
He said that China's dominance in critical minerals processing gives them the power that OPEC had in the 1970s and Russia had in Europe last year, to cut off supplies to suit a geopolitical goal.
"It isn’t feasible or desirable to build everything domestically," he said, and said that the U.S. is working with its partners to make sure they are building capacity in these strategic areas, too.
"We are unambiguously committed to not leaving our friends behind," he said. He noted that the U.S. and Canada are accelerating collaboration on mining and processing the raw materials needed for electric transportation and that the U.S. and Japan signed a critical minerals partnership, and that the EU and the U.S. are negotiating on supply chains for critical minerals and batteries.
In a question-and-answer session after his speech, Sullivan said that there are a number of challenges to rapidly adding mining and processing capacity globally for the green transition. One is that commodity prices swing wildly, which makes investment decisions risky.
He said that the U.S. wants to do similar agreements on critical minerals like it has with Japan "with the major critical mineral producing states." However, that raises hard questions about how to relate climate goals to overall environmental goals, and, he said, the "labor practices in those countries" can be problematic.
"We need to have a deep conversation with American labor at the table," he said, to get them on board with the idea that buying materials from Chile, Southeast Asia and Africa "is important in order to realize the kind of industrial outcomes we are looking for here in the United States. That is something we’re going to have to work through."
He said the administration will also need to work effectively with stakeholders in the business community and on Capitol Hill in this arena.
Sullivan defended the Indo-Pacific Economic Framework as a way to address the problems of the moment, such as supply chain resiliency and digital trade rulemaking.
He criticized those who argue that because the administration has no agenda to reduce tariffs through inking traditional free trade agreements, that means they have no clear trade policy. "Some have looked at these initiatives and said: 'But they’re not traditional FTAs,'" he said. "That’s precisely the point. We need a new approach. Trade policy needs to be about more than tariff reduction."
But he said the administration has not "sworn off market liberalization," and he said they do intend to pursue traditional FTAs. He didn't say when, or with which countries.