U.S. is 'absolutely' behind on supply chain independence from China, Biden advisor says
- "This is a major concern for the U.S. and I think for the rest of the world," Special Presidential Coordinator Amos Hochstein told CNBC.
- China controls roughly 60% of the world's production of rare earth minerals and materials, according to a recent report by Rice University's Baker Institute.
- For the U.S., whose relations with China can currently be described as tense at best, this poses several potential security risks.
The U.S. has some rapid catching up to do if it is to secure the reliability of its supply chain and its independence from competitors like China, a top White House advisor admitted this week.
"Look, this is a major concern for the U.S. and I think for the rest of the world. As we are going into a cleaner, greener, an entirely new energy system, we have to make sure we have a diversified supply chain," Special Presidential Coordinator Amos Hochstein told CNBC's Hadley Gamble on Monday.
"We can't have a supply chain that is concentrated in any country, doesn't matter which country that is," he said. "We have to make sure from the mining and refining process to the building of the batteries and wind turbines that we have a diversified system that we can be well supplied for. That is the only way this will work from an economy perspective."
Asked if the U.S. was behind in this endeavor, Hochstein, who also served in the Obama administration as chief energy envoy, replied: "Absolutely we're behind." But, he added, "It doesn't mean that we're out."
China controls roughly 60% of the world's production of rare earth minerals and materials, according to a recent report by Rice University's Baker Institute for Public Policy. Those resources include lithium, cobalt, nickel, graphite, manganese and other rare earth elements crucial for making things like electric vehicles, batteries, computers and household goods.
They're also essential for renewable technology like solar panels and wind turbines, which are central in the U.S.'s attempt at an energy transition away from fossil fuels. As just one example, China refines 95% of the world's manganese — a chemical element used in batteries and steel manufacturing — despite mining less than 10% of its global supply.
For the U.S., whose relations with China can currently be described as tense at best, this poses several security risks, were China to decide to weaponize that market dominance at any point. The Covid-19 pandemic and the Russia-Ukraine war have also highlighted the fragility of the global supply chain.
'We have not invested'
The White House, in a Feb. 2022 fact sheet, wrote that "The U.S. is increasingly dependent on foreign sources for many of the processed versions of these minerals. Globally, China controls most of the market for processing and refining for cobalt, lithium, rare earths and other critical minerals."
"We have to recognize that we have not invested, and that's what the United States is trying to do now, is not only say the same old talk of we want to have partnerships," Hochstein said. "We're going to come to this table together with our G7 allies, we're going to pool our resources, we're going to make sure that the money is there."
This includes dedicated financial and business incentives, Hochstein said. The Biden administration's mammoth 2022 Inflation Reduction Act aims to invest heavily in the supply of and access to critical minerals in allied countries, and offers approximately $369 billion in funding and tax credits to boost renewable energy technology and critical mineral production.
"We're giving the incentives, through the IRA, to tell companies 'look, if you make sure you're mining in the U.S. or in other countries and bring it to the U.S. for refining, processing and battery manufacturing, there's going to be the kind of financial incentives there'," he said.
Despite his warnings about supply chain risk, Hochstein rejected the idea that the U.S. was being held hostage to China.
"I don't want to talk about being held hostage, at the end of the day China is doing what they think is right for them," he said. "They're trying to build an economic energy in the clean energy space and we all need to do the same."
"We have to learn from what we went through in the oil and gas energy space, as we transition to a new energy market that relies still on natural resources," he added.
"They may not be oil and gas, but they're still natural resources — they're not abundant everywhere in the world — so we have to make sure from the U.S. perspective that we have a supply chain for the United States, and that's what the legislation that we passed in the United States is trying to do."