U.S. National Security Advisor:

"IRA’s critical minerals clause is insufficient…Additional measures planned"

U.S. National Security Advisor:

"IRA’s critical minerals clause is insufficient…

Additional measures planned"

On April 27 (local time), the U.S. White House National Security Advisor Jake Sullivan remarked that the IRA’s incentive clause was insufficient for building a flexible supply chain for the U.S. critical minerals sector, and gave notice that additional measures were being planned. Last year, the U.S. passed and began enforcement of the Inflation Reduction Act, which contained provisions on paying subsidies to Electric Vehicles made in North America for purposes of expanding EV penetration.

Thereafter, last month the U.S. government strengthened the conditions of critical minerals and batteries through detailed enforcement rules, so that only those EVs that satisfy them will be paid subsidies. As a result, the EVs of most foreign companies including Hyundai Motors and Kia Motors have been excluded from the list of targets of subsidy payments, which has led to the raise of complaints by the relevant foreign countries. As National Security Advisor Sullivan has given notice that there will be additional measures from the administrative branch on the critical minerals sector, effects will be felt in Korean industries including batteries.

At a conversation at the Brookings Institute, a think-tank in Washington D.C., Jake Sullivan introduced the current situation by saying, “Today the U.S. takes up only 4% of global lithium production, and 13% of cobalt production. On the other hand, at least 80% of total critical minerals are processed in China.”

Then he went on to say that the supply chain of critical minerals for clean energy production and consumption is in a dangerous state of becoming weaponized as in the case of oil in the 1970s and natural gas in Europe in 2022.

“The issue of the supply chain is one on how much production volume can be acquired, and responding to the market in which price stability has dropped conspicuously,” he remarked. “In terms of production volume, we shall do something similar with the major mineral producing nations as we did in negotiating with the E.U. and Japan.” Originally, the U.S. restricted the original producers of critical minerals for payment of EV subsidies to the U.S. and FTA partners. But now, it is taking/pursuing measures through separate agreements so that Japan and E.U. countries that have not established FTAs with the U.S. can receive subsidy benefits.

“The IRA has created a lot of incentives in regard to the market, but it is insufficient,” said Sullivan. The National Security Advisor emphasized that “We must take additional measures in order to reduce the gap between our current situation and our future goals.”

“For this, ultimately we need to consider an expanded type of dialogue between the major countries that produce minerals, and the countries that hold clean energy technology…We need to find out whether this is what they call the ‘Minerals Club’, or the Minerals Security Agreement’, or bringing in the partnership that we have already begun,” added Jake Sullivan.

On this day, National Security Advisor Sullivan maintained the existing position that China would be considered the greatest challenge, and that China’s threat should be reduced, but reaffirmed that this does not mean a severing of relations.

“Since the inauguration of the Biden administration, non-market practices have integrated with the international market order, and this has proven to pose a considerable challenge. China is paying extensive subsidies in not only traditional industrial areas such as steel, but in future core industries such as bio. American competitiveness is weakening not only in the manufacturing industry but in future core technologies.” “Pursuant to the agenda of President Joe Biden, we expect investment of USD 3.5 trillion in the public and private sectors in the coming year,” he said. He also emphasized that the U.S. had taken measures in the form of the Chips Act and IRA in order to resolve the weakening of competitiveness in areas such as semiconductors and critical minerals.

He still emphasized that “The U.S. does not consider it possible nor appropriate to build everything domestically. Our goal is not an isolated economy, but supply chain flexibility and security.” He went on to explain that “The beginning is to strengthen domestic competency, but this will lead to building competency and resilience with trans-border partners.” “Our message is consistent. We will not let our friends fall behind,” said the U.S. National Security Advisor. “Through the IRA, we will build a clean energy manufacturing ecosystem based in North America, upon which we will expand it to other regions such as Europe and Japan. This will be a way to change the IRA from a source of conflict to that of strength and trust,” he added. In regard to the current American trade policy, such as industry cooperation among Korea-U.S.-Japan, and the Indo-Pacific Economic Framework (IPEF), “Some say that such initiatives are not traditional FTAs. The traditional model is not suitable for what we aim to solve today…Today’s trade policy must have more significance that just reducing tariffs,” he emphasized.

In regard to the policy towards China in the high tech area, he said, “In important areas related to national security, we have strengthened evaluation of foreigners’ investment, and have also shown progress in foreign investment in sensitive technology.” “These are customized measures, and are not a technological blockade. They are restricted to a narrow slice of technology, and focused on a few countries that wish to challenge the U.S. militarily,” he explained

“We want to reduce our risk with China, but we do not wish for decoupling. Our export controls are limited to technology that can threaten the military balance…The U.S. is competing with China in a multitude of dimensions, but we do not wish for conflict and confrontation,” he reaffirmed.

On the other hand, on the comment that the U.S. is focused on checking China, yet is hurting its allies in the process, he said, “This is the core of the conversation we had with Europe, Japan, and South Korea’s President Yoon a couple of days ago on his visit to the U.S….With the advent of the Biden administration, I think we have built sufficient trust in many places, including the Indo-Pacific region…We have effectively proven this in the semiconductor sector. Last year, our control of exports to China consisted of remarkable detail and discipline,” he assessed, emphasizing focus on minimizing damage to allies.

(Provided by Newsys)