China's damage to U.S. industrial base called 'horrific'

[Editor's note: This story originally was published by Real Clear Energy.]

By John Adams
Real Clear Energy

China’s entrance into the World Trade Organization nearly two decades ago was supposed to transform China. Instead, it has transformed the U.S. – for the worse.

If the belief was that China would come to liberalize as it integrated into the global economy, that aspirational thinking has now been proven a dangerous illusion. China has indeed changed, emerging as an industrial goliath and strategic rival, but as clearly committed to totalitarianism and to playing outside the economic rules as ever before.

China’s central planners have exploited America’s laissez faire attitude and employed the full power of the state to dominate key industries, trading profit again and again for market share. China has become the world’s workshop and has aspirations for much, much more – in its own conception, global economic dominance.

Instead of checking China’s strategic industrial march, U.S. policy has often actually encouraged Chinese economic might as a necessary dimension of globalization and economic efficiency. The accompanying damage to America’s industrial base and the middle-class jobs it supports has been horrific. The parallel supply chain vulnerabilities that have emerged are equally troubling. Despite the manifest tragedies of the pandemic, the consequent supply chain shock has served as a much-needed wakeup call: American overreliance on China and Chinese-controlled supply chains has become a five-alarm fire.

Remarkably, in our current extremely partisan climate, bipartisan support is coalescing around checking China’s predatory practices and ensuring additional American industries aren’t allowed to slip away. It’s a promising start but winning the race for the critical industries of tomorrow and reshoring critical supply chains is going to take forceful, committed policy. Whether or not the U.S. is up for it remains to be seen.

China’s dominance of mineral supply chains, essential to nearly every facet of the digital economy, our national defense and the clean energy revolution, underscores the severity and scale of the problem.

While the U.S. was launching the shale revolution, China made itself the dominant producer of the world’s solar panels and wind turbines and has now built up a stunning lead in controlling the lithium-ion battery industry, the key to electric vehicles (EVs), and its material supply chain. Of the 115 battery mega factories in the global pipeline, 88 will call China home. Likewise, U.S. leadership of the semiconductors industry, so important for clean energy, is threatened by Chinese advances in the semiconductor market.

China is rapidly creating a new geopolitical order around the battery and the plug and using mining and mineral processing to do it. With an EV future now almost a given, China’s strategic play has proven a masterstroke.

China’s control of critical minerals is now such a glaring vulnerability that Admiral Mike Mullen, a former chairman of America’s Joint Chiefs of Staff, recently told The Economist, “It’s a very significant strategic issue for the U.S. and the West. I almost liken it to Huawei. We wake up and they’re in control of the world.”

While China has relentlessly absorbed the world’s mineral supply chains, U.S. mineral production – despite vast domestic mineral reserves – has steadily eroded. America’s adversarial approach to mining has meant that U.S. mineral import reliance has doubled in little more than two decades. The U.S. now finds itself import reliant on nearly 50 key minerals and metals with the production and processing of a stunning number controlled by China.

Reinvigorating American mining and rebuilding the material supply chains that are the irreplaceable foundation for the industries of the future is a litmus test for the seriousness of American policymakers to confront China’s industrial ambitions. We need robust American mining to safely and efficiently produce critical minerals. The alternative – leaving critical minerals that we have in abundance in the ground – cedes dominance of the global minerals market to our most vigorous and implacable rival, China.

The challenges facing America’s economic security require strategic thinking beyond the whims and limitations of the market. Now is the moment to embrace a return to carefully considered industrial policy that encourages a reshoring of industry and levels the playing field against China. This is an industrial arms race America’s economy and her workforce can’t afford to lose.

 

John Adams, U.S. Army Brigadier General (Retired), is President of Guardian Six Consulting and a former Deputy U.S. Military Representative to NATO’s Military Committee. He is a national security advisor and writer on national security and defense issues, and was the lead author for the 2013 study on the U.S. defense industrial base, Remaking American Security. 

[Editor's note: This story originally was published by Real Clear Energy.]

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