> While efforts to diversify supply chains away from China are welcome and important, these different risks are potentially leading the United States to an overreaction against Chinese involvement in the U.S. economy. America has fallen behind on key battery technologies and may cut itself off from the opportunity to learn from China’s recent manufacturing advances and fall even further behind. Targeted efforts to allow some Chinese firms to partner with American companies could help the United States play catch-up but would require a more nuanced approach than what we have seen of late.
**Clean Energy Technologies and National Security**
> Policymakers have flagged four dimensions of national security with respect to China’s domination of these supply chains. Each may require distinct policy, security, and investment responses.
> The first has to do with *dual-use technologies* that have both civilian and military applications. The concern is that in the event of a conflict, the United States will not have access to key materials necessary both to sustain its economy and to produce weapons. Possible solutions to this problem include more extensive use of minerals stockpiles.
> The second involves risks of *coercion* by resource holders. Russia has repeatedly tried to leverage its position as an energy superpower for political concessions, including in the run-up to and in the wake of its invasion of Ukraine. In a dispute with Japan in the 2010s, China withheld exports of rare earth minerals with a variety of industrial and military applications. One concern is that China might try to use its critical minerals dominance as a source of leverage, fears somewhat justified by the export controls China has imposed on germanium, gallium, graphite, and antimony over the past year.
> The third speaks to *cybersecurity risks*. Electric vehicles and solar panels are connected to networks, and policymakers fear that data derived from these devices could be used for nefarious purposes, or there might be backdoor ways to remotely control these devices.
> […]
> The fourth deals with the risks to the *commanding heights* of the economy through domination by a peer competitor. The last of these is potentially the most critical, yet least discussed. The broad logic of the commanding heights argument is that the material basis of state power is partially military and partially economic. Because economic power can be converted into military capability, states have an interest in nurturing strategically important sectors that can generate wealth to finance their militaries. Clean technology is one of a handful of growth sectors that the Biden administration has identified as central to the country’s future.
**The Commanding Heights**
> […]
> The notion of “commanding heights” of the economy, of strategically important sectors that states want to sustain, was once ridiculed as an artifact of a bygone era of heavy state intervention in Western economies and the failed policies of communism in the Soviet Union. However, China’s success and ability to change its source of comparative advantage through patterns of state subsidy and investment to dominate whole industries have changed the conversation, particularly in an era when market forces alone will not deliver the clean energy transition as quickly as is required.
> Industrial policy, the intentional efforts by states to support certain industries and discourage others, has become integral to efforts to hasten the clean energy transition. Alongside that change is the COVID-era realization that globalization wrought undesirable supply chain vulnerabilities that could only be addressed with more domestic production. States are now seeking to reclaim a more explicit role in directing which industries to attract and support, to generate tax revenue to pay for services, to provide good employment, and to support other public purposes such as environmental sustainability.
> For the Biden administration, this “foreign policy for the middle class” is the embodiment of this revived role for the federal government with the Bipartisan Infrastructure Act, the Inflation Reduction Act, and the CHIPS Act. The notion that some sectors are more strategically important than others requires justification, lest it become a “get out of jail free” card to justify protection of national industries at the expense of foreign competition. Such moves might ultimately be self-defeating if a country, even with aggressive subsidies and protection, cannot generate a viable industry.
> Industries that produce components and inputs that generate military capability, such as aviation and shipbuilding, are strategically important. This logic was a major factor in congressional and Biden administration support for the CHIPS Act, with semiconductor chips having so many military applications. The concentration of high-end chip manufacturing in a single company in Taiwan or advanced lithography from a single supplier from Netherlands was seen as a strategic vulnerability, enough to warrant a $53 billion government investment.
> […]
> Chinese dominance of batteries and solar technology is relatively recent and was driven by state action. Moreover, the current scale of those industries is only a small fraction of what they will ultimately become. For example, in 2023, the lithium-ion battery market was valued at $56.8 billion but by one estimate is expected to rise to nearly $187.1 billion by 2032. Similarly, the global solar photovoltaics panel market was nearly $184.9 billion in 2021 and is estimated to grow to almost $300 billion by 2028.
> If more sectors of the economy (the power sector and transportation, to start) electrify, then batteries will become cornerstones of the 21st-century economy in the way that chips were in the 20th century. While there may be other industries that emerge as core economic sectors and sources of productivity, battery production and electric vehicles will certainly be among them. Ceding most of these markets to other states, notably the People’s Republic of China, would mean the United States would forgo revenue from a major growth industry.
> […]
> From an international relations perspective, China’s domination of solar, batteries, and cars would confer large relative gains with which China could finance military expenditures. From a geostrategic competitive perspective, that would allow China to close the gap in military capability with the United States and perhaps contribute to an even more dangerous power transition moment. And, in wartime, manufacturing companies that make goods for the civilian economy can be repurposed. This is another major reason why it is crucial for the United States to retain domestic manufacturing capacity.
MrStrange15 on
>While these minerals and refined products are sourced from various countries, China heavily dominates their processing and other stages along various supply chains.
Wow, a piece on rare earth minerals, where they make the distinction between mining and processing? I had lost hope that these existed.
rr215 on
I’d respect this policy a lot more if US leadership called a spade a spade and said that the national security being threatened is American manufacturing and associated roles. The solar panels being “connected to networks”, with a bogus implication that these networks suddenly become vulnerable to hacking, isn’t the true national security threat; it’s the cheap, efficient panel being a fraction of the cost of American ones threatening American jobs.
Call it a defense tariff, just don’t make yourself look like a clown parroting blatant lies. You may have noble intentions, but you just make misinformation more accessible in the NatSec space, which is already rife with it
3 Comments
Summary:
> While efforts to diversify supply chains away from China are welcome and important, these different risks are potentially leading the United States to an overreaction against Chinese involvement in the U.S. economy. America has fallen behind on key battery technologies and may cut itself off from the opportunity to learn from China’s recent manufacturing advances and fall even further behind. Targeted efforts to allow some Chinese firms to partner with American companies could help the United States play catch-up but would require a more nuanced approach than what we have seen of late.
**Clean Energy Technologies and National Security**
> Policymakers have flagged four dimensions of national security with respect to China’s domination of these supply chains. Each may require distinct policy, security, and investment responses.
> The first has to do with *dual-use technologies* that have both civilian and military applications. The concern is that in the event of a conflict, the United States will not have access to key materials necessary both to sustain its economy and to produce weapons. Possible solutions to this problem include more extensive use of minerals stockpiles.
> The second involves risks of *coercion* by resource holders. Russia has repeatedly tried to leverage its position as an energy superpower for political concessions, including in the run-up to and in the wake of its invasion of Ukraine. In a dispute with Japan in the 2010s, China withheld exports of rare earth minerals with a variety of industrial and military applications. One concern is that China might try to use its critical minerals dominance as a source of leverage, fears somewhat justified by the export controls China has imposed on germanium, gallium, graphite, and antimony over the past year.
> The third speaks to *cybersecurity risks*. Electric vehicles and solar panels are connected to networks, and policymakers fear that data derived from these devices could be used for nefarious purposes, or there might be backdoor ways to remotely control these devices.
> […]
> The fourth deals with the risks to the *commanding heights* of the economy through domination by a peer competitor. The last of these is potentially the most critical, yet least discussed. The broad logic of the commanding heights argument is that the material basis of state power is partially military and partially economic. Because economic power can be converted into military capability, states have an interest in nurturing strategically important sectors that can generate wealth to finance their militaries. Clean technology is one of a handful of growth sectors that the Biden administration has identified as central to the country’s future.
**The Commanding Heights**
> […]
> The notion of “commanding heights” of the economy, of strategically important sectors that states want to sustain, was once ridiculed as an artifact of a bygone era of heavy state intervention in Western economies and the failed policies of communism in the Soviet Union. However, China’s success and ability to change its source of comparative advantage through patterns of state subsidy and investment to dominate whole industries have changed the conversation, particularly in an era when market forces alone will not deliver the clean energy transition as quickly as is required.
> Industrial policy, the intentional efforts by states to support certain industries and discourage others, has become integral to efforts to hasten the clean energy transition. Alongside that change is the COVID-era realization that globalization wrought undesirable supply chain vulnerabilities that could only be addressed with more domestic production. States are now seeking to reclaim a more explicit role in directing which industries to attract and support, to generate tax revenue to pay for services, to provide good employment, and to support other public purposes such as environmental sustainability.
> For the Biden administration, this “foreign policy for the middle class” is the embodiment of this revived role for the federal government with the Bipartisan Infrastructure Act, the Inflation Reduction Act, and the CHIPS Act. The notion that some sectors are more strategically important than others requires justification, lest it become a “get out of jail free” card to justify protection of national industries at the expense of foreign competition. Such moves might ultimately be self-defeating if a country, even with aggressive subsidies and protection, cannot generate a viable industry.
> Industries that produce components and inputs that generate military capability, such as aviation and shipbuilding, are strategically important. This logic was a major factor in congressional and Biden administration support for the CHIPS Act, with semiconductor chips having so many military applications. The concentration of high-end chip manufacturing in a single company in Taiwan or advanced lithography from a single supplier from Netherlands was seen as a strategic vulnerability, enough to warrant a $53 billion government investment.
> […]
> Chinese dominance of batteries and solar technology is relatively recent and was driven by state action. Moreover, the current scale of those industries is only a small fraction of what they will ultimately become. For example, in 2023, the lithium-ion battery market was valued at $56.8 billion but by one estimate is expected to rise to nearly $187.1 billion by 2032. Similarly, the global solar photovoltaics panel market was nearly $184.9 billion in 2021 and is estimated to grow to almost $300 billion by 2028.
> If more sectors of the economy (the power sector and transportation, to start) electrify, then batteries will become cornerstones of the 21st-century economy in the way that chips were in the 20th century. While there may be other industries that emerge as core economic sectors and sources of productivity, battery production and electric vehicles will certainly be among them. Ceding most of these markets to other states, notably the People’s Republic of China, would mean the United States would forgo revenue from a major growth industry.
> […]
> From an international relations perspective, China’s domination of solar, batteries, and cars would confer large relative gains with which China could finance military expenditures. From a geostrategic competitive perspective, that would allow China to close the gap in military capability with the United States and perhaps contribute to an even more dangerous power transition moment. And, in wartime, manufacturing companies that make goods for the civilian economy can be repurposed. This is another major reason why it is crucial for the United States to retain domestic manufacturing capacity.
>While these minerals and refined products are sourced from various countries, China heavily dominates their processing and other stages along various supply chains.
Wow, a piece on rare earth minerals, where they make the distinction between mining and processing? I had lost hope that these existed.
I’d respect this policy a lot more if US leadership called a spade a spade and said that the national security being threatened is American manufacturing and associated roles. The solar panels being “connected to networks”, with a bogus implication that these networks suddenly become vulnerable to hacking, isn’t the true national security threat; it’s the cheap, efficient panel being a fraction of the cost of American ones threatening American jobs.
Call it a defense tariff, just don’t make yourself look like a clown parroting blatant lies. You may have noble intentions, but you just make misinformation more accessible in the NatSec space, which is already rife with it