China wants to own the road

It has been clear for some time that the People’s Republic of China intends to displace the United States as a hegemonic power. But Western leaders have been unwilling to recognize the failed strategy of integration and make the badly needed adjustments.

Seduced by the conceit that the fall of the Soviet Union heralded the triumph of a liberal world order of free trade and interdependence, the U.S. and other liberal countries invited China to join the World Trade Organization, believing that China would happily accept the tenets of a liberal economic order and “play by the rules” of that order.

Unfortunately, the hope that China would liberalize as it was integrated into an ever more connected world has been dashed on the rocks of geopolitical reality. Instead, Beijing has emerged as an economic and military rival while remaining unwaveringly committed to authoritarianism. And it does so all as it exploits the global system to improve its position at the expense of liberal states, most notably the U.S.

It’s not as though it’s too soon to understand China’s strategy either. China has refused to play by the economic rules, employing massive government support for Chinese firms and atrocious environmental and labor standards to upend global markets. It has pulled one key American industry and supply chain after another into its orbit, eliminating millions of U.S. jobs along the way. It is garnering the privileges of a system without practicing any of its responsibilities to the other participants of that system.

There are, finally, promising signs of change. The Trump administration has refused to acquiesce to China’s economic predation. In Congress, bipartisan support is building to stop the further erosion of critical American industries and to reinvigorate others that have been allowed to atrophy. The supply chain shock of the pandemic has served as a much-needed wake-up call. Overreliance on China and Chinese-controlled supply chains has become a major problem.

China’s vice-like grip on mineral production and processing is a case in point. In a startling May 2019 report, Foreign Policy magazine found that China “is the No. 1 producer and processor of at least ten critical minerals and metals that are essential to high-tech industries … giving China both an economic edge in the next high-tech industrial revolution and increasing geopolitical power.”

China has amassed unrivaled control of the raw materials that are the fundamental building blocks of the digital economy, our most sophisticated weapons systems, and any hope of a non-fossil-fuel energy revolution. Consider China’s dominance of the lithium-ion battery industry, the key to the production of electric vehicles. According to Benchmark Mineral Intelligence, a consultancy focused on the EV supply chain, of the 100 (and counting) battery megafactories rising across the globe, over 70 will be built in China; just five will call the U.S. home.

China is using its dominant position in the production and processing of key battery metals, such as lithium, cobalt, nickel, and graphite, to become the mecca for the next iteration of the global automobile industry. The potential economic and geopolitical ramifications are staggering if indeed the road to the road goes through Beijing.

The confluence of China’s strategic vision for the growing importance of mining and mineral production and American antipathy toward resource development has created a perfect opportunity for the U.S. to be left behind. Despite vast domestic mineral reserves, U.S. reliance on the importation of critical minerals has more than doubled in little more than two decades, with China now the dominant supplier of 23 out of 35 minerals deemed critical by the departments of Defense and Interior.

Confronting China’s industrial ambitions will require a coherent plan that places the reinvigoration of U.S. mining and material supply chains at the top of the agenda. When all parties play by the rules, there is little question that free trade is more efficient than the alternatives. But to make a fetish of free trade fails to account for changing geopolitical circumstances. Support for certain strategic industries is an overdue recognition of the fact that the ability of the market to address geostrategic vulnerabilities is limited.

As Republican Sen. Marco Rubio, a new champion of forceful action against China, recently told the Washington Post, “Ultimately, capitalism is the best economic model. It will always yield the most efficient outcome. But there are times where the most efficient outcome is not the best outcome for America.”

The U.S. needs to take decisive action to ensure that critical industries and the supply chains that support them don’t further slip into China’s hands. Confronting China’s predatory industrial strategy and the strategic ambitions built upon it is a task of the highest importance.