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TWN
Info Service on WTO and Trade Issues (Feb26/08) Geneva, 6 Feb (D. Ravi Kanth) — The United States unveiled separate critical mineral deals with the European Union, Japan, and Mexico on 4 February, as Washington appears to be building the groundwork for targeting China in an incipient “Cold War” over these minerals that includes lithium, cobalt, and rare earth elements with significant implications for economic and technological security, said analysts. Notwithstanding the seemingly humiliating treatment the three countries – the EU, Japan, and Mexico – received under the unilateral reciprocal framework agreements with the US last year, the coming together of these countries appears to indicate an attempt to reshape global supplies of critical minerals that are central to a range of sectors, from semiconductors to magnets. US Secretary of State Marco Rubio did not mince words when he said that the global supply of critical minerals is heavily concentrated in the hands of one country, at a time when US President Donald Trump is planning to visit Beijing. “And that lends itself to, at worst-case scenario, being used as a tool of leverage in geopolitics, but it also lends itself to any sort of disruptions. And so, it’s key and important, and I think there’s a growing global recognition that we need to have supply chains for critical minerals that are reliable and diverse across the world.” Coincidentally, as the US, the EU, and Japan have decided to develop “Action Plans” ostensibly to strengthen critical minerals supply chain resilience and move towards deeper plurilateral cooperation in economic security, according to the US Trade Representative, President Trump spoke to his Chinese counterpart President Xi Jinping on several issues, including the purchase of more soy products by China. However, Vice-President J D Vance, while justifying the takeover of Venezuela for global oil supplies, said, “there is no realer thing than oil – and I would add to that there’s no realer thing than critical minerals.” He continued: “Now, we know that today the international market for critical minerals is failing. It’s failing to create domestic markets or dignified jobs for our labor forces, and it’s failing to keep our nations safe. Supply chains remain brittle and exceptionally concentrated. Asset and commodity prices are persistently depressed, driven downward by forces beyond any individual country’s control.” Given the long time span involved in developing critical raw minerals such as lithium and gallium, among others, the Vice-President said that “advanced economies with deep capital markets are finding that projects (of critical raw minerals) cannot clear costs.” The announcements came on the same day the US State Department hosted a meeting with trading partners that Washington hopes will join a cooperative effort to create reliable global supply chains in critical minerals. Secretary of State Rubio told the gathering that currently global supply is heavily concentrated. CHINA’S OPPOSITION In a seemingly furious response to the US move to form a new plurilateral bloc over critical minerals, a spokesperson for the Chinese Foreign Ministry on 5 February said that Beijing opposes any country setting up exclusive blocs to disrupt the international economic and trade order. At a regular press briefing on 5 February, when asked for comments on the launch of the alliance, which will be chaired by South Korea through June, Chinese Foreign Ministry spokesperson Lin Jian said an open, inclusive international trade environment that benefits all serves the common interests of all countries. All parties have the responsibility to play a constructive role in keeping global industrial and critical mineral supply chains stable and secure, the Chinese Foreign Ministry spokesperson said. Meanwhile, these developments come at a time when the Wall Street Journal (WSJ), in a detailed news report on 5 February, titled “The American and Chinese Economies Are Hurtling Toward a Messy Divorce”, pointed out that “the two countries (US and China) are starting to manage a messy divorce on the most sensitive issues of trade. Both view their economic competition as a matter of national security.” According to the WSJ report, “China’s leaders have determined that disentangling the two economies – often called “decoupling” or ” de-risking” – is inevitable. The shift fulfills a longstanding Chinese ambition to no longer be a junior partner to the West. It’s a break with decades of Beijing’s orthodoxy that China’s economic success depended on selling low-cost goods to American consumers and building its technological might with US money and know-how.” In a separate press release issued on 4 February, US Trade Representative Jamieson Greer also claimed that the US, the European Commission, and Japan intend to develop Action Plans for critical minerals supply chain resilience. Under these Action Plans, the US, the European Commission, and Japan will develop coordinated trade policies and mechanisms, such as border-adjusted price floors, that can mitigate critical mineral supply chain vulnerabilities, the press release said. Although the press release did not specifically mention China, some US media outlets claimed that the moves are aimed at China. The WSJ highlighted that “the US enlists Mexico, EU and Japan in its minerals race with China.” US-MEXICO ACTION PLAN The USTR also announced a US-Mexico Action Plan that appears to be already enacted and operational in nature. Under this first-of-its-kind bilateral framework, the US and Mexico will, over the next 60 days, identify specific critical minerals of interest, examine the feasibility of border-adjusted price floors for critical minerals imports, and consult on how such price floors could be incorporated into a binding plurilateral agreement. The plan also calls for coordination on regulatory standards, investment promotion and screening, geological mapping, research and development, rapid-response mechanisms, and coordinated stockpiling, as well as the identification of priority mining, processing, and manufacturing projects for policy and financing support, according to a report in the Washington Trade Daily on 5 February. The USTR said the US-Mexico action plan reflects a shared effort to counter market distortions that have left North American supply chains exposed, linking the initiative to the upcoming USMCA Joint Review discussions. Following is the text of the US-Mexico Action Plan: UNITED STATES-MEXICO CRITICAL MINERALS ACTION PLAN 1. Introduction In recent decades, distortions resulting from pervasive non-market policies and practices have left critical minerals supply chains of market-oriented economies vulnerable to a myriad of disruptions, including economic coercion. Correcting these vulnerabilities is imperative, as critical minerals are strategic assets integral to modern and innovative industrial economies, and diverse, resilient, and market-based supply chains are essential for our economic and national security. To this end, the United States and the United Mexican States (“Mexico”) (collectively, “the Participants”) seek to develop a new paradigm for preferential trade in critical minerals supported by price floors and other measures, and have established an Action Plan to deliver concrete, near-term results towards securing mutual supply chain resilience for critical minerals. 2. Action Plan The Participants, in accordance with their respective laws and grounded in mutual respect for sovereignty, will implement the following Action Plan over the next 60 days: * The Participants will discuss the feasibility and development of coordinated trade policies and mechanisms, including border-adjusted price floors for critical minerals imports, focusing in the first instance on certain select critical minerals to be determined. * The Participants will further consult on how such price floors may be embodied in a plurilateral agreement on trade in critical minerals, including any other provisions that would be necessary to ensure supply chain resilience for contracting parties to such an agreement. Such other provisions may include, but would not be limited to: — Trade measures to support a resilient critical minerals marketplace among the contracting parties; — Regulatory standards for mining, processing, or trade in critical minerals; — Technical and regulatory cooperation; — Investment promotion and screening; — Geological mapping coordination; — Coordinated rapid responses to prevent disruptions and crises in critical minerals supply chains; — Research and development of new critical minerals technologies; and — Coordinated stockpiling. * The Participants will identify specific mining, processing, and manufacturing projects for critical minerals of mutual interest in the United States, Mexico, or third countries, which comply with internationally recognized responsible business conduct standards, and will prioritize financing and other policy support for those projects. The Participants will endeavor to bring more transparency to the market by sharing information about the location of potential critical mineral deposits developed by their respective government surveyors, including the US Geological Survey and the Mexican Geological Survey. 3. This Action Plan will be developed on behalf of the Participants by the Office of the United States Trade Representative (“USTR”) and the Mexican Secretariat of Economy (“Economy”). +
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