From Phenomenal World:
When Americans ran short on baby food last year, President Joe Biden made use of a Korean War-era authority—the Defense Production Act (DPA)—to airlift goat milk from Australia, despite protectionist howls from American formula companies. Operation Fly Formula funded the passage of 27 million powdered milk tins of Bubs Australia to American babies. If that makes you wonder whether the same authority could be used to get the critical minerals needed for the energy transition, then you might just be a Polycrisis reader.
At the G7 summit in Hiroshima last week, Biden met Australian Prime Minister Anthony Albanese. Together, they set out to answer a crucial question: is it possible for a country to have China as its largest trading partner, but the US as its security ally? The pair signed a wide-ranging compact that could see American taxpayers support—as buyers, matchmakers, and financiers—Australian mineral projects under the DPA. Details will be fleshed out by the US National Security Council and Australian Department for Industry. If approved by Congress, which looks likely, Australia will be counted as a “domestic” territory of the US under DPA’s key Title 3 on strategic industrial policy. Currently, only foreign companies with mines operating inside the US or Canada can obtain DPA investment.
Approval of the compact would help solve a major problem facing the US and the G7. Clean energy components like electric vehicle (EV) batteries require minerals like lithium and nickel. But reserves in both the US and Europe are either scarce or extraction is held up by concerns over pollution and indigenous land rights. Australia mines more than half of the world’s lithium and virtually all of it goes to China for processing. The West wants that dependence to change. Australia and Canada, both US allies with significant reserves of most transition minerals, and with powerful local mining constituencies, are stepping up for G7 “friendshoring.”
In addition to lithium, Australia has substantial reserves of nickel and cobalt, also used for making EV batteries, as well as copper, used for making, well, everything electric. Days after the G7, Australian trade minister Don Farrell was euphoric, following a Detroit meeting with US secretary of commerce Gina Raimondo. He spoke of a “golden age” of mining to come.
Farrell was in Detroit for talks on the Indo-Pacific Economic Framework: a quasi-trade agreement that the US is developing with thirteen countries, to coordinate supply chains. Ministers from another transition minerals powerhouse, Indonesia, were also in attendance. But DPA deals were not forthcoming, even though economic affairs minister Airlangga Hartarto said his country was ready to supply the US with its domestically made EV batteries.
Both Australia and Indonesia have to balance their relationship with China, their biggest export customer, with the allure of US markets and the new subsidies on offer there. Mineral resources—iron, gas, lithium, copper—form the bulk of Australia’s $180-billion-a-year exports to China; more than half of Indonesia’s sales to China are ores and metals. A call for an investigation into the origins of Covid-19 led to China effectively banning Australian coal, timber, lobster, wine, and barley. The impact was muted as other markets filled some of the gap, but the lifting of restrictions this year was welcomed by smaller sectors....
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Indonesia in particular has been an area of special attention for the blog. If interested, many of our previous links can be found in February 26's "Nickel shows Indonesia how to escape the middle income trap".
