Throughout our history, the vast mineral wealth of the United States has been a pillar of economic growth and of a high standard of living. Mineral resources have undergirded the strength of the manufacturing sector for over 200 years. Abundant energy resources have helped metals industries as well as modern technology sectors to flourish. In recent decades however, this leadership position has been challenged by competitors ranging from Europe and East Asia to developing economic powers like China, Mexico, and Brazil.
Moreover, the drivers of dynamism in the global economy have evolved to more technologically sophisticated industries such as telecommunications, semiconductors, advanced computing, robotics, medical products, and aerospace. Many of these new industries require different types of natural resources, combined with advanced scientific expertise, to create innovative new products for the global economy. The United States does not always have the needed mineral resources, or the ability to procure them in an economically and environmentally efficient manner, to compete with competitors – especially those with substantial state subsidies behind their extraction and manufacturing sectors. While the United States remains a leader in many of these industries and the digital services and technologies enabled by them (such as artificial intelligence, autonomous vehicles and the Internet of Things), its leadership is increasingly challenged by competitors such as China and Russia.
Part and parcel of the challenge has been China’s record of exploiting a country’s own natural resources, or gaining control of resources in other countries, needed for advanced industries. China’s tactics, encapsulated in its Made in China 2025 and Belt and Road (BRI) programs, include purchasing mining assets from Central Asia to Africa, South America and even Australia.1 In the first decade of aggressive Chinese state investments to acquire natural resources outside its borders, nearly 50% of its purchases were in energy and 20% in mineral resources.2
The COVID-19 pandemic has accelerated some important preexisting trends toward bringing industrial supply chains, including medical products, back to the United States. First, the cut-off of medical supplies, not just from China but from Europe and other allies to some extent, brought the vulnerabilities of relying on outside sourcing into clearer and more immediate focus. 90 countries blocked the exports of medical products during the early months of the pandemic. Second, border closures around the world, even within the European Union, added to the worries about interruptions in supply chains, including for workers and logistics. 70% of the world’s points of entry restricted foreign travelers at some point as the pandemic grew.3 Third, border closures and supply chain interruptions increased tension between nations, especially between the United States and China, which was heavily criticized for its suppression of information at the start of the pandemic. Cooperation between the United States and allies also suffered. Fourth, the economic collapse due to the pandemic response again focused attention on the need to create more domestic jobs, including those in the hard-hit industrial sector. Finally, all of these developments led allies such as the United Kingdom, Japan and the European Union to reinvigorate thinking, and create new policy proposals meant to bring production back to home territories. Clearly, these trends support policies to increase the resiliency of domestic production even beyond the parameters of defense and medical security.
This report will concentrate on select examples of the growing US vulnerability to global competitors due to shortages of key mineral resources in our domestic supply base. Dependence on China for raw materials and competition with its manufacturing firms is also a key focus. Shortages do not always indicate a problem because our close allies in mineral-rich countries like Australia and Canada can mitigate gaps in domestic supply. However, China’s growing control over many basic materials, and its history of using that control as leverage for its own economic and political goals, makes this a cause of concern for the continued strength of the US manufacturing economy.