Reducing Dependence on China
The Wall Street Journal reports U.S., Allies Weigh How to Reduce Economic Ties With China
The Group of Seven advanced democracies are growing concerned that China, a dominant supplier of many goods and materials, could similarly cut off key exports in the event of a conflict or another pandemic, according to top Western economic officials. They also worry that Western investment and expertise, if left unrestricted, could help develop Beijing’s military.
But G-7 officials say they are also trying to avoid beggar-thy-neighbor steps that undermine global economic growth as they try to unify behind specific policy measures that reduce dependence on China. The G-7 comprises the U.S., Canada, France, Germany, Italy, the U.K. and Japan.
“The big strategic choice that we have is whether in seeking to strengthen our supply chain resilience…we do so in a way that tumbles the world back into protectionism,” Jeremy Hunt, the U.K.’s chancellor of the exchequer, said in an interview last week in Washington. He said Western allies should “work together as fellow democracies to improve that resilience.”
“The question is, can we be more determined to enhance security of supplies, but not push the world that far that we are into a second Cold War?” IMF Managing Director Kristalina Georgieva, of Bulgaria, said at a press conference last week. “I am among those who know what are the consequences of a Cold War. It is a loss of talent and contribution to the world. I don’t want to see that repeated.”
German Coalition Torn Over China
Eurointelligence reports the EU and Germany is Torn over China
The other coalition crisis that is currently playing out in Germany is between the SPD and the Greens. It is about China. Normally, this is a fight the SPD would be expected to win: SPD+industry+media vs. the Greens. But it is more complicated than this. This time it is the Greens+Biden+Von der Leyen. Olaf Scholz is torn. He needs to keep both his coalition and the transatlantic alliance together.
[Mish Notes: Olaf Scholz is the German Chancellor. SPD plus the Greens and FDP are in a 3-way fragile German coalition led by Scholz. Ursula von der Leyen is President of the European Commission.]
The conservative wing of the SPD is criticizing the Greens over what it called an anti-China policy, and warns about disastrous economic consequences for Germany in particular. China is Germany’s largest trading partner. The Greens retorted that the SPD has learned nothing from its catastrophic Russia policies. It is always doing business with autocratic regimes. This is not a lower level brawl. This is one of the fundamental ideological conflicts playing out in German and European politics right now.
Scholz is not inclined to show leadership in Europe, neither alone nor together with Emmanuel Macron. He has instead re-enforced the transatlantic partnership, a policy we think will last for as long as Joe Biden is in office. The pressure on Scholz to toughen policy on China is more likely to come from the US than from the Greens. But the Greens hold two critical ministries – foreign and economics – which collude on forging a new China strategy. Robert Habeck has been blocking a number of planned Chinese acquisitions and investments. The European Commission is also in the process of revising its China strategy. Ursula von der Leyen’s recent speech is very close to the Green’s own position. Both seek a greater representation of geopolitical and security issues in the EU’s China policy.
Three Conflicting Goals
- Reduce dependence on China
- Avoid protectionism
- Appease the Greens
Impossible Requirements
1 + 2 is difficult if not impossible. 2 + 3 is difficult if not impossible. 1 + 3 is difficult is not impossible.
1 + 2 + 3 is 100% guaranteed impossible.
As an added bonus, please factor in Taiwan.
Then factor in China’s control of rare earth elements and permanent magnets. The permanent magnets and other rare earth elements are used in cell phones, missiles, wind turbines, and electric vehicles.
China May Ban Rare Earth Tech Exports on Security Concerns
Asia Financial reports China Contemplating Export Ban on Rare-Earth Magnets.
Bloomberg reports China Contemplating Export Ban on Rare-Earth Magnets.
China is considering imposing an export ban on “certain rare-earth magnet technology” in retaliation for the US restricting exports of advanced computer chips.
There has long been speculation of such a move, given China’s dominant role in the production of rare earth elements, as more than two thirds of the global supply of rare earths is processed on the mainland.
Concern that Beijing would do this again has prompted the United States and allies such as Canada, Australia and Japan to spend many millions of dollars creating their own supply chains of ‘critical minerals’.
One of the main reasons that has not happened already is the fact that processing rare earth is a toxic process that creates wastewater and tailing ponds that leak acids, heavy metals and substances such as cadmium, lead and thorium, a low-level radioactive element, most of which are harmful to human health.
China’s dominance of the rare earths processing stems from its lax environmental standards, which allowed it to produce rare earths at a far cheaper price than any international rivals.
Bloomberg notes that China has sanctions on Lockheed Martin which violated China’s core interest over arms sale to Taiwan.
The US gets 80 percent of its rare earth elements from China. The EU is even more dependent.
Twelve Rare Earth Elements You Need to Know
Politico has a report on The Critical Raw Materials You Need to Know
Rare earth elements are crucial for the production of many high-tech products. They are key, for example, for producing permanent magnets — an essential component of smartphones, TVs, computers, as well as car and wind turbine engines.
The EU is increasingly concerned about the availability of these minerals and metals — in particular, it wants to shore up its supply of the so-called critical raw materials that are key to hitting its green and digital ambitions.
For now, the bloc is heavily reliant on autocratic regimes, particularly China, to supply these materials — a form of dependency that risks leaving it highly politically vulnerable.
The EU is fully dependent on imports to satisfy its demand for rare earths. China currently provides nearly 99 percent of the EU’s supply of these minerals, as well as about 98 percent of its rare earth permanent magnets.
Spectacular Failure Underway
The US and EU need rare earths to meet environmental goals and they get rare earths from China.
It takes about 12 years to get a rare earth mine into production under normal circumstances and these circumstances are not normal.
The US and EU greens will fight every step of the way in permitting a new mine on a NIMBY and environmental basis.
Any attempt to eliminate fossil fuels by 2035, as Biden nationally, and the state of California are independently trying, will massively increase costs then fail spectacularly.
Damn the Inflation, Full Speed Ahead
Biden’s and California’s energy policy can easily be summed up in meme phrases.
- Damn the Inflation, Full Speed Ahead
- What, Me Worry?
- The world will end in 12 years if we don’t address climate change.
On March 22, 2022, I commented Biden Doing Everything Possible to Drive Up the Price of Oil, Some of It’s Illegal
On November 30, 2022, I commented The EU is Very Worried About Biden’s Inflation Reduction Act (IRA)
On December 3, 2022, I commented Damn That Wind, It’s Not Listening to Biden or AOC
On February 7, 2023, I commented Biden Gives a Well-Delivered SOTU Speech Begging for More Inflation and Tax Hikes
On January 16, 2023, I commented “America First”, Biden and Trump Both Guilty of Sponsoring Inflation
Biden’s Energy Policy Mandates Cause Severe Shortage of Electrical Steel and Transformers
In case you missed it, please see Biden’s Energy Policy Mandates Cause Severe Shortage of Electrical Steel and Transformers
California Utilities Seek to Charge People Based On Income, Not Energy Usage
Finally, please consider California Utilities Seek to Charge People Based On Income, Not Energy Usage
PG&E knows it will have to raise prices significantly. Under guise of fairness, the proposal is a blatant Marxist ploy to mask the cost of inane carbon policies.
It won’t stop with energy. Look for “affordable housing” rent surtaxes based on income as the next logical target.
Then look for the state to attempt to tax those fleeing from these Marxist ideas.
Meanwhile, someone please tell me how we are going to reduce dependence on China, avoid protectionism, and appease the Greens with their preposterous demands to eliminate gasoline-powered vehicles by 2035.
This post originated at MishTalk.Com
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Mish
Did they stop the export trade so they would get dollars?