July 22, 2025 • 53 mins
How did the Chinese Communist Party build near-total control over the world’s most critical battery inputs? And how can the U.S. respond before it’s too late?
Josh Birenbaum of the Foundation for Defense of Democracies (FDD) joins Elaine Dezenski on Coercive Capital to discuss their new report which breaks down the CCP’s strategic capture of the global battery supply chain—and outline what it will take for the United States to regain control.
Based on FDD’s July 2025 report, “Unplugging Beijing,” this episode offers a practical, urgent blueprint for restoring American battery independence.
Topics include:
How China cornered the lithium, nickel, and graphite markets
The role of state-backed firms in Beijing’s battery dominance
Why market solutions alone won’t solve the problem
What U.S. policymakers must do now—and who’s already behind
Hosted by Elaine Dezenski.
New episodes weekly on Coercive Capital.
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:14):
Today.
Speaker 2 (00:15):
I want to start with a quote from former Senator
Mitt Romney when he was speaking about China round about
twenty twelve, and he said, when a predator unbound by
the rules followed by its competitors is allowed to operate
in a free market, that market is no longer truly free.
(00:35):
He was referring to China. Welcome to a course of capital.
We've got a great show for you today. We're exploring
the world of critical supply chains and advanced batteries. Why
batteries to help answer this question and much more. I'm
joined by my colleague Josh Beerenbaum, Deputy director at the
Center on Economic and Financial Power at the Foundation for
(00:56):
Defensive Democracies. Josh, as he describes himself, is a recovering
lawyer and an expert on anti corruption and financial integrity.
He researches and writes on a broad range of topics
related to global financial reform. We've collaborated a lot over
the years, including on major work associated with Chinese, Belton
wrote initiative Josh, welcome to the show. It's great to
(01:19):
have you.
Speaker 1 (01:20):
Thanks for having me. I'm thrilled to be here, so.
Speaker 2 (01:23):
I'm excited to have you here because we have co
authored a new report which is launching today. It's entitled
Unplugging Beijing, a Playbook to Reclaim America's Advanced Battery Supply Chain.
As we write in our report, advanced batteries are indeed
the bullets of future wars. So today we're going to
talk about why batteries matter, how China has come to
(01:45):
dominate the battery supply chain, and what the US and
allies can do about it. This work is an outgrowth
of our ally shoring initiative at FDD, moving critical supply
chains out of authoritarian regimes, and that early work on
ALI shoring going back to is now coming to fruition
in interesting ways. We talked about the ALI sharing concept
(02:05):
and other segments. We think it's actually a critical component
of rethinking what we've described as the near global economy,
an economy that is driven by democratic principles, an economy
that is driven by free market principles and upheld by
rules that are well understood and certainly not circumvented. So
(02:30):
let's see how much we can get through in the
next fifty minutes or so. We have a lot here,
but I want to start with why batteries matter, Why
they matter for the economy, for security, and for supply
chains of the future.
Speaker 1 (02:45):
It's an excellent question.
Speaker 3 (02:47):
It was one of the first questions we asked, is
what sector do we want to look at here for
this report? The US economy and the global economy more
generally is deeply dependent on China for a number of
key inputs components, goods, and the supply chain vulnerability of
various parts of the economy could have been scrutinized. Transportation, energy,
(03:11):
There are a lot of places where we could have looked,
but batteries really kind of has it all. It has
critical minerals that you're hearing a lot about in the
trade discussions. It has technology that began in the United
States and was sort of scooped up by China and
using a host of non market practices, which we discussed
(03:32):
in the report, they were able to leverage this supply
chain against US, and some of the things that we're
seeing now in terms of export controls and restrictions really come.
Speaker 1 (03:43):
Down to this central technology. And as you.
Speaker 3 (03:45):
Point out, when we started this report, we were in
the Biden administration, and the battery was central to what
the Biden administration saw as an environmental reworking and the
next generation of cars, and that still is true that
those cars from a big part of the battery market.
But in the future, batteries are going to have a
(04:07):
tremendous applications outside of just vehicles, and we're already seeing
that in the defense sector. They're in laptops and cell phones.
This is really an everything type technology, and it's one
that is critically important to the competitiveness of the US
economy going forward.
Speaker 2 (04:26):
Yeah. Absolutely, we have a complicated supply chain, a situation
where the US finds itself in a dependency role across
the entire supply chain from the upstream, the midstream, and
to the downstream. And I want to talk a little
bit about how we've defined the battery supply chain for
(04:49):
this research, because that's an important place to start. So
when we talk about the upstream in the battery supply chain,
we're talking about the critical mineral and other core inputs
into the development of the battery. Okay, so the extraction
and processing. When we go to the midstream, we're talking
(05:11):
about the components of the battery, so the anodes and
the cathodes and the other critical parts that ultimately become
become assembled into the downstream, which is the final battery tech,
which finds its way into lots of applications as you've
as you've mentioned, from evs to drones to energy grids.
(05:34):
So this idea of advanced battery technology becomes a core
component of so many systems and technologies and operations and
supply chains that are critical to how we function as
a society. Right and and again to your point about
(05:57):
you know, we started this conversation talking about ev ease.
You know, evs are having their moment and then not
having a moment, and who knows where we're going, But
this transition to electric batteries is happening that we know
(06:17):
is happening, and we need to understand what the what
the challenges are around that and how to pull that
supply chain into an orbit where we don't face the
risk of an economic competitor cutting off components of that
of that system. So let's talk a little bit about
the upstream, midstream, and downstream and how we see the
(06:41):
risks in the report. So we talk a lot about
the processing choke hold. We talk a lot about minerals
being in certain locations, but kind of walk us through
that assessment if you would.
Speaker 3 (06:53):
Josh, absolutely, so. There are really two separate issues in
the upstream. As you point out, there's the extraction of
the minerals, getting them out of the ground, and then
there's the processing with respect to extraction. The good news
is these minerals are fairly geographically spread over the world.
China certainly doesn't have a head start with respect to
(07:14):
where the minerals are. Many of the best locations for lithium,
for instance, are in South America. The US has tremendous
deposits as well. What China has enabled themselves to do, however,
is to really corner the market on ownership and control
(07:36):
of various minds. So a tremendous number of minds have
been scooped up around the world by China, and in
this year in particular, we actually are seeing China's acquisitions
of minds go up to levels that we haven't seen.
Speaker 1 (07:50):
For five or ten years. They also have a massive.
Speaker 3 (07:55):
Advantage, however, on the processing side, and that's really where
the chokehold becomes very difficult to quickly overcome.
Speaker 2 (08:03):
Yeah, just so our listeners and viewers know what kinds
of minerals are we talking about here.
Speaker 3 (08:10):
Sure, Yeah, So most of the battery technology now is
lithium based, and so lithium is the number one mineral
that's going into the batteries, but key minerals also include nickel, cobalt, manganese, graphite,
and to some extent, there's a cheaper version of batteries
that requires an iron and phosphate mix that has many
(08:34):
fewer restrictions.
Speaker 1 (08:34):
And that's the battery technology that China prefers.
Speaker 2 (08:38):
Yeah, and we'll dig into that in just a minute.
So moving now to the midstream where we're talking about
the anodes and the cathodes and the other critical components.
Why do we have a challenge in the midstream right?
It's not just about extracting the critical minerals, getting them process,
getting access to those, it's also about the reduction of
(09:01):
these midstream components.
Speaker 1 (09:02):
Absolutely.
Speaker 3 (09:03):
So the big two components, as you point out, in
the battery are an anode in the cathode. Cathode is
where most of the cost of a battery comes in.
And China really has the market cornered on those components
the materials that go into it, which of course are
these minerals that are processed and then put together in
very specific ways. China controls ninety seven percent of the
(09:26):
materials that goes into the eNode and more than ninety
percent of what goes into the cathode. So we're really
looking at a complete stranglehold around some of these inputs
that are going into a battery. And this has trickled
down effects when we're trying to build a downstream market.
Speaker 1 (09:41):
Yeah.
Speaker 2 (09:41):
Absolutely, And in the downstream where we're talking about the
final assembly of batteries, this is where we get what
I would call a compounded impact on the supply chain.
Even if batteries are assembled, for example, in California, it
doesn't mean that the midstream components or the critical minerals
(10:02):
that drive the midstream are free of Chinese influence.
Speaker 1 (10:10):
No.
Speaker 2 (10:10):
In fact, it's just the opposite. So by the time
we get to the downstream, it's almost less important where
the batteries are assembled at that point because so much
of the risk is already inherent within the broader supply chain.
Speaker 1 (10:25):
Absolutely.
Speaker 3 (10:25):
I mean, the point is that China can turn off
the tab at any point down the street. If they
turn off the minerals, if they turn off the processing,
if they turn off the components, you can't make the batteries,
and as a result, China has a dominant position on batteries.
There are South Korean competitors and Japanese competitors, and some
efforts at building up a domestic industry in the US,
(10:48):
but Europe recently tried to build a battery industry under
a champion called Northfold and that struggled and went into bankruptcy.
Speaker 1 (10:57):
These are difficult things when you don't control the inputs.
Speaker 3 (11:00):
And one of the things that we can talk about
later is China has a vertical integration across these supply chains,
where one company will often be involved in every component
of the process.
Speaker 1 (11:11):
Up to the battery. US companies generally don't have that.
Speaker 2 (11:15):
Right before we get there, because that's a super important
part of our conversation, I want to talk a little
bit about LFP technology, which is the lithium battery tech
that is really gaining the most traction, particularly for ev applications,
(11:36):
and we have a case study in the report that
lays out what happened with this tech, which by the way,
was developed in the United States and was initially commercialized
by a company called A one twenty three Systems and
in the late two thousands they went through a process
(11:58):
of developed and initial deployment, but ultimately we're unsuccessful in
scaling that technology. And what happened after that is a
fascinating story and maybe a bit of a warning in
terms of how we think about the protection of our
intellectual property going forward.
Speaker 3 (12:20):
Absolutely, I think that there are a lot of lessons
to learn from one to twenty three, and also from
what happened with battery technology in general, Like so many
technologies that were homegrown, we've lost the edge, and we've
lost it in very specific ways, both as a result
of American inattention and because of structural difficulties that happen
(12:42):
when these two competing systems come in contact with each other.
So for LFP batteries, which are one of the two
main chemistries of batteries, and it's the cheaper battery, but
increasingly the equally competitive one, where you're getting the same
(13:02):
number amount of range, the number of cycles of batteries,
the number of times you can charge it is even
greater than the other technology. That technology was invented at
the University of Texas by a person who went on
to win the Nobel Prize for being a core developer
of lithium batteries in general, and it was marketed here.
(13:23):
It was actually able to scale to the point that
it was being put into vehicles and was having some success.
A recall set that back, some other headwinds pushed their
stock price down, and is so often happens.
Speaker 1 (13:36):
In the US.
Speaker 3 (13:37):
A young, juvenile innovator tries to bring a technology that's
cutting edge to the market and the market's not quite
ready for it, and as a result, A one twenty
three goes into bankruptcy and Chinese companies comes in and
scoops the technology out of bankruptcy for relatively small investment.
(13:57):
That technology is now owned in China and it's being
used widely. Now, did that company not invest enough? Did
the US government not invest enough? Why was China able
to do it? It's not that the Chinese system is
better or our system didn't do enough, but these are
just incompatible systems. Where China can put in two hundred
(14:20):
and thirty billion dollars of subsidies support an EV and
battery industry, where the US is putting a couple of
billion dollars, that in balance just creates difficulties in companies
like eighty one twenty three.
Speaker 2 (14:34):
Yeah. Absolutely, And this incompatibility of systems is really a
thematic as we look at the non market practices, and
I want to want to dig into that now as
we think about where where the US has opportunity, but
also how did we end up in a situation which
(14:56):
has really been in development over the last at least
two decades almost three now, So let's talk about this
this incompati excuse me, incombat compatibility of systems and where
where we are now. So we uh, we outline several
(15:18):
of these in the report, and I want to I
want to maybe start with the issue of dumping an
overproduction because this is such a this is such an
important conversation happening right now in terms of trade and tariffs,
and part of what the Trump administration is uh seemingly
(15:38):
responding to with respect to China is a massive amount
of overproduction of everything, including batteries. Right, So we can
dig into this example of batteries as to why this
is such a problem not just for US, but for
any market economy that is trying to get a foot
hold in these advanced manufacturing arenas and finding that it's
(16:04):
one structural impediment after the next in terms of getting
that getting that foothold.
Speaker 3 (16:11):
Yeah, the dynamic really starts with overproduction.
Speaker 1 (16:15):
And overproduction occurs because of certain structural parts.
Speaker 3 (16:20):
Of the Chinese economy, the way that they organize their
economic structure.
Speaker 1 (16:25):
And you and I have talked about this a bunch.
Speaker 3 (16:26):
It's not that the market system in the non market
system is a good guy and bad guy situation. It's
just that when there's a non market player, a player
that doesn't need to worry about profit motive or doesn't
need to worry about, you know, the valley of death
that that startups have to worry about in the US,
it allows them to have certain advantages over market players,
(16:51):
that is, Western multinationals with boards of directors and shareholders
and concerns that that that Chinese companies are free from.
So what happens with China is the central state government
states their growth figures in advance. And that's really peculiar
if you think about it. When you look at US growth,
(17:13):
we see what we sold the year before and then
we give a growth number. In China, it's the inverse.
You say, this year we will have five percent growth.
The last two years that was the target, and that
is a dictate that is pushed down to the local level.
The local governments then build a package of incentives and
structures that guarantee that that number is met, whether it
(17:36):
is economically viable to do that in a Western sense
or not. So this year is an example. Chinese analysts
are saying that they are on pace to make more
than thirty million electric vehicles, even though the entire global
demand last year for electric vehicles was seventeen million, So
they're on pace to double the global demand from last
(17:58):
year according to their figures. Western analysts are a little
bit septical of those figures, putting the number more at
twenty five million, still more than all of the.
Speaker 1 (18:06):
EV sold last year. So why are they making so many.
Speaker 3 (18:10):
They're not going to be able to sell them at all,
and as recent news reports are showing, sometimes they're taking
them off the assembly line immediately marking them as used
cars and selling them as used just to count the
sale for the law government. And the reason is because
you make five percent more than last year, you meet
the growth target.
Speaker 1 (18:31):
And that is why EV.
Speaker 3 (18:33):
Companies across the spectrum in China, battery companies, lithium processing
companies are losing money and it's a process that the
US would not be able to sustain. But because of
the state led system, overproduction is incentivized, and that leads
to what is often called.
Speaker 2 (18:53):
Dumping, right right. And I want to make the point
here that tariffs can be used in a lot of ways,
but I think this is one example of where they
can actually be used effectively and where if we had
more harmonization around the pushback against this overproduction, particularly with
(19:14):
the Europeans, because they're getting a lot of this surplus
EV production, they have a larger market for EV's right now.
Brazil is getting some of that. There are other countries
right that are going to absorb this. We're certainly not
going to be absorbing it. So terffs can be really
effective in that way, but it's not the only thing
(19:37):
that we need to do, because as we talk about
in terms of China's non market practices, they go much deeper.
So beyond the overproduction and dumping of product, we have
monopolies and price manipulation and IP theft, and all of
these things work together in a sense to create this
(20:00):
structural barrier that becomes impossible for any company to compete
against no matter how good their technology is, even if
they're in it for the longer term, because chances are
that the folks in Beijing can probably weigh out that competition.
So I want to talk a little bit more about
price manipulation because this is really a key part of
(20:22):
the upstream risk that we talk about in detail in
the report, and it has to do with controlling so
much of the processing and even a volume of critical
minerals that Beijing is able to play with those prices
in a way that really wreaks havoc for market participants.
Speaker 3 (20:43):
Absolutely, and you're absolutely right that these non market practices
all reinforce one another. They're all building towards this bottleneck,
this choke point of the industry in general, and it
all lends it self towards monopoly power. But going to
price manipulation in particular, it's a fascinating story. We looked
(21:07):
at at two instances where price manipulation was clearly a
risk and vulnerability. So the first one we looked at
was in the nickel industry. Nickel is fairly geographically concentrated
in the best high quality nickel that's used in batteries
usually comes from Indonesia. Of the processing facilities in Indonesia,
(21:31):
seventy five percent of those are Chinese, so the vast
bulk of what is being processed in Indonesia is Chinese owned.
Speaker 1 (21:42):
There is a.
Speaker 3 (21:42):
Meeting that happens in twenty nineteen where a range of
Chinese companies, including chin Chong, the largest nickel producer, meets
with the President of Indonesia and, according to some sources,
encourages the government of Indian Nia to impose a ban
on the sale of raw nickel out of the country,
(22:05):
so that the only players that can process the nickel
are the ones that have facilities inside Indonesia, namely shin
Chong and other Chinese companies. So that goes into effect
at the same time that some mysterious anonymous buyer.
Speaker 1 (22:22):
Purchases a huge.
Speaker 3 (22:24):
Volume of nickel off of the London Mercantile Exchange.
Speaker 1 (22:29):
Let excuse me, the London Metals.
Speaker 3 (22:30):
Exchange, which is supposed to be the repository of where
you go to get emergency supplies of medals and minerals,
and that is intended to sort of flatten out some.
Speaker 1 (22:43):
Of the risk of market cornering behavior.
Speaker 3 (22:46):
Somebody buys what ultimately becomes one hundred thousand tons of
nickel out of the LME and prices skyrocket. The players
that don't have access to processing in Indonia are really
hard hit. And after some time it seems it comes
out that the largest purchaser of those anonymous nickel purchases
(23:10):
off of the LEM was in faction Chong, the nickel
producer that encouraged the band to begin with.
Speaker 1 (23:16):
So these this sort of market manipulation behavior.
Speaker 3 (23:19):
That you that you can infer from this behavior is
really making prices go up and down at whim.
Speaker 1 (23:29):
It's not the last time that huge amounts of nickel
were taken out of the lem.
Speaker 3 (23:33):
Uh At some point, Shinjong purchased so much nickel out
of the LEM that prices fightd four hundred percent in
three days.
Speaker 1 (23:41):
So there's a pattern here.
Speaker 3 (23:42):
And and lithium is a sort of similar vulnerability.
Speaker 2 (23:47):
Yeah, yeah, And so this I think gets to the
heart of you know, this ally shoring question right around
critical minerals and processing to be able to reduce the
ability for any one player. Today it's China, Maybe tomorrow
it's going to be somebody else to control the pricing
(24:08):
in a way that really pushes out market competitors, and
you know, again, this seems like an area where we
could be doing a lot more with allies and partners
if we wanted to take our trade agreements to the
next level, if we wanted to harmonize the way that
we think about extraction and processing and potential to pool demand.
(24:34):
I'm getting a little bit ahead of myself because we're
going to talk about that in the recommendations. But there's
so many opportunities here to really think through, you know,
how to break that choke hold. So some of the
other non market practices that we talk about in the
report include monopolies, aggressive use of vertical integration, and IP theft,
(24:56):
which of course is a well known challenge. I wanted
to talk a little bit about this notion of aggressive
vertical integration and how that's playing out with some of
the major companies in China that now go upstream and
downstream around batteries in a way that is difficult to replicate.
Speaker 3 (25:17):
Yeah, I mean, vertical integration is not a per se
non market practice in the same way that monopolization is.
Vertical integration is allowed in the United States in the
ways that monopolies nominally are not, but it's very rare,
and it's rare because it's not terribly efficient. The most
the most efficient market is one where there are lots
(25:39):
of players, lots of competition, and where you have specialization
to really get the lowest price per component and create
efficiencies over of scale over the whole process. But vertical
integration gives you tremendous market control and power. And so
China's government has enabled degree of vertical integration and incentivized
(26:02):
it in a way that wouldn't make economic sense in
the United States. Tesla is probably the closest example of
a US or Western company that really has attempted to
build some degree of vertical integration.
Speaker 1 (26:15):
But in China it's a whole other level.
Speaker 3 (26:17):
So if you look at BYD, who's known primarily as
a car manufacturer, and a lot of this technology in
the cars is really phone technology, right, you see a
lot of the players in the EV market are just
glorified tablet makers that are turning the tablet as to
the center operating system.
Speaker 1 (26:35):
Of what becomes a car.
Speaker 3 (26:36):
But BYD not only makes the car and distributes them
through its own distribution network, it also makes the batteries.
It's one of the two biggest battery manufacturers in the world.
It has its own minds, It extracts its own minerals,
it processes its own.
Speaker 1 (26:52):
Minerals, it builds the components.
Speaker 3 (26:54):
So really from taking lithium out of the ground and
processing it to putting on the containership and shipping it
all over the world, BID has every element under its control.
And what that does is you cannot have the kind
of leverage against BOID that BID has against its competitors,
(27:16):
and it creates an un level playing field. That's one
of the ways in which vertical integration leads to monopolies.
But as you point out, dumping, and I'd love to
circle back to the ways that we're talking about allies.
You mentioned allies before allies and adversaries. You know, some
of China's friends are getting having to face dumping from
(27:39):
China as well in ways that are helping Chinese monopolies
and hurting their economies.
Speaker 2 (27:45):
Yeah, yeah, absolutely.
Speaker 3 (27:47):
So.
Speaker 2 (27:47):
One of the criticisms, and I think it's a valid one,
is the contrast between what we could call us short
termism when we think about addressing some of these industrial
t challenges versus China's long term view and long term
industrial planning, infrastructure, state sponsored infrastructure. Is this something that
(28:12):
will continue to hamper us? How do you see this?
You know, we've we've been talking a lot about again
the idea of the neuroglobal economy, creating the market rules
by which market players can effectively compete across the board.
But will we get there without a long term industrial strategy.
Speaker 1 (28:34):
Well, I think that we need.
Speaker 3 (28:38):
Industrial elements, industrial strategy elements rights. As our friend Max
Mislesha said, we need an industrial policy with American characteristics.
Speaker 1 (28:49):
We need to.
Speaker 3 (28:50):
Really build our version of industrial policy that looks nothing
like China, because frankly, China's built a system where the
vast number of companies playing are not making money.
Speaker 1 (29:01):
They're money losers.
Speaker 3 (29:02):
That's not how economies should function, It's not how.
Speaker 1 (29:05):
We want the global economy to function.
Speaker 3 (29:07):
So we don't want to match China's number of two
hundred and thirty billion dollars, and we should be pushing
back upon any country that is doing that level of
massive subsidization to the point that profit profits don't no
longer matter. But it's also true that we are very
fickle with companies and that especially small innovators have a
(29:29):
really hard time scaling efficiently, and there are ways in
which the government can help that process and smooth out
some of those bumps that makes it far too likely
that a company like A one to twenty three goes
into bankruptcy. There should in a way that it that
that company could have survived a downturn in its stock
(29:51):
prices in a way that allowed us to retain that
technology here in the United States. And the lack of
scaling support and innovation pooling in R and D techs
right off, these things really add up in a way
that sometimes were tying our own hands.
Speaker 2 (30:09):
Yeah, so I want to go to another potential approach
which has you know, some drawbacks, I think, and it's
about the risk of licensing technology from players like cattle
and others. Let's take the example of the LFP technology,
(30:31):
which has essentially become the global standard, or at least
the China standard, and because they're manufacturing most of the evs,
LFP tech has really come to the floe. It's a
it's a more cost competitive technology, which means that some
of the domestic players have in the US have been
thinking about, you know, whether they need to license that
(30:54):
tech in addition to maybe looking at some alternatives to
other battery chemistries that they've been relying on. But licensing
tech is that a way to get out of supply
chain dependency? And what are some of the risks associated
with that?
Speaker 1 (31:09):
Yeah, I mean there's a there's a lot of pushback
against licensing.
Speaker 3 (31:13):
I think that Ford talked about licensing LFP technology from
Catal and there's a lot of political pushback. And that
makes some sense because in this country it feels like
that's signing up for a dependency, and to some extent
that's true. But it's also true that this technology is
still moving at light speed and a lot of the
(31:34):
things that are licensed today may not be the technology
that we'll see in ten or twenty years. So we're
in a very different situation than we are with say,
internal combustion cars, where the technology has been fairly stable
for the last ninety years.
Speaker 1 (31:50):
We're going to.
Speaker 3 (31:50):
See major changes in a way that make these licensing
agreements I think seem relatively small. That being said, China
has leveraged US IP for decades. I mean, we talk
about IP theft and that's certainly a huge concern. Thousands
of US companies have accused Chinese companies of IP theft,
(32:10):
and there's specific cases of corporate espionage that bear that out.
But there's also been a lot of technology that's been
shifted over to China by what's called knowledge transfer, where
you know, China, a Chinese company, an American company enter into
a joint venture, and some of that technology passes to
China in a sort of aggressive way from the Chinese side.
(32:32):
But there can be ways in which we can learn
as well as teach, and we shouldn't be shy about
learning how to make LFP batteries in.
Speaker 1 (32:41):
An efficient way.
Speaker 3 (32:42):
I also think that again, LFP batteries are right now
stepping stone to where we're going in the future, and
it may be that learning how to make them here
enables us to make the next generation where the IP
will be American.
Speaker 2 (32:57):
Yeah. So I want to shift now to some of
the recommendations that we talk about in the report, and
we can get into some of the details behind these
and how they relate to countering the specific non market
practices that we've touched on and some others that are
detailed in the report. But let's start with the upstream
(33:19):
of the supply chain. So we talk about stepping up
critical mineral extraction and scaling non Chinese processing capabilities, both
in the US and working with trusted allies and partners.
It seems to me that there's some there's some progress
on this front, and it probably started over the last
(33:40):
couple of years with the Biden administration focus on domestic
processing and addressing some of these challenges around mineral extraction.
But it's also been jump started with the Trump administration
coming out with policy on prioritizing domestic mineral extraction, which
(34:02):
actually requires us to rethink some of the timeframes around
how we do this. But let's dig into that recommendation
a little bit more in some of the concrete things
that we talk about, including aspects like permit reform, for example,
which are so so important to speeding up the process.
So you know, we're not talking about ten or fifteen
(34:25):
years to bring critical mineral mining online, but maybe something
more like three to five years and processing capabilities typically
taking what five eight ten years? Moving that to you know,
half of that would be would be a fantastic thing
to achieve. But can we can we get there?
Speaker 3 (34:46):
Well, there's a lot we can do, and it's less
clear where we'll end up, but we know where we
need to start. So as part of the researching the
drafting of this report, we did a lot of work
with industry players to sort of see what the impediments
really work. We held multiple roundtables with a ton of
(35:07):
public and private stakeholders and really spoke with people across
the board, on the processing side, on the EV side,
on the batteries. All of these players sort of shared
a similar story. One is that permitting is critically important.
Permitting makes projects work better, and no one is asking
(35:31):
for permitting to go away. We don't want to build
a system like China. One of the reasons that China
makes ninety five percent of all the graph height in
the world is because the process that they use for
is incredibly harmful to the workers and to the communities.
Speaker 1 (35:44):
They're dumping toxic chemicals right into lakes and rivers.
Speaker 3 (35:48):
We don't want to do that in America, and that
enables China to have very low cost graph height to
put on the global market. But it's not that that's
what we want the long term process to be. So
when we're thinking about making this in the US, we
need to take steps to build a better technology for
(36:08):
that processing and build better systems. But part of that
comes from the permitting. That being said, there's a lot
of good ways to do permitting better than we're doing
it now. We're doing it just about as bad as
we can. There's no reason why we need to have
so many levels or review on the federal, state, and
local level, why we can't have the sharing of approval
(36:29):
from one project to the other in a similar area.
There's no reason that the government couldn't do environmental vetting
of certain known reserves and the region before.
Speaker 1 (36:39):
Projects even get stood up. So there's a lot that
can happen.
Speaker 3 (36:42):
And part of this is also making sure that there's
a venue for community members and for affected stakeholders to
challenge a mind, but that that happens in a timely
fashion because some of the times what you're seeing is
litigation that takes decades.
Speaker 1 (36:58):
Whereas if everybody comes out and.
Speaker 3 (37:02):
Litigates in a single venue at a single time, and
in a rocket docket sort of venue, which is one
that is designed to move.
Speaker 1 (37:09):
Quickly, we can make these projects better but quicker.
Speaker 3 (37:12):
And that's that's something that the US government needs to
work on. And one of the things that the credit
that Trump administration is prioritizing.
Speaker 2 (37:21):
Yeah, absolutely, So I want to move on to the
next set of recommendations around investing in innovation and specifically
around novel battery chemistries. There are some in the industry
who said, the only way we're going to get out
of our dependency on China is to innovate our way
into something new. So something new could look like maybe
(37:46):
a sodium ion battery or other chemistry that significantly reduces
the upstream dependency on certain kinds of critical minerals. Tell
us a little bit more about that, Chad and what
we need to be thinking about in terms of investing
in this area.
Speaker 3 (38:06):
Yeah, I mean, there are so many elements of this
supply chain that are ripe for innovation. And as I
said earlier, this is an area we are seeing leaps
and bounds technologically. I mean, you're really it's like we're
almost in the era of the huge computer that takes
up the whole room. Still we're going to see massive
leaps going forward, and I would want to highlight three
different parts where I would anticipate big jumps. One is
(38:29):
the technology for the processing of minerals. So I talked
about graphite before. We will and need to come up
with better processing intellectual property that's made here in the US,
and it innovates new ways of making a cleaner and
more efficient processing of these critical minerals.
Speaker 1 (38:47):
The second is on the chemistries of the batteries themselves.
Speaker 3 (38:51):
So as you point out, there's sodium ion, So sodium
what you have in table salt is a lot more
plentiful than lithium. It's not as energy dense, but for
applications like an electric screwter, it might work really well.
So that's one path. There's lithium sulfur, which reduces the
cost of cobalt and nickel with a fairly abundant mineral
(39:17):
and has greater energy density itself and has some advantages.
There's solid state batteries, which don't change the chemistry but
are have much larger range and or much more stable batteries.
Speaker 1 (39:29):
And then there are batteries that play with the balance
of these things.
Speaker 3 (39:33):
So cobalt and nickel are expensive minerals and they're very
hard to get. Cobalt is almost exclusively found in the
Democratic Republic of Congo, which is an unstable place where
China has a huge choke hold on mind ownership. But
some of these batteries reduce the amount of cobalt, the
amount of nickel, and increase the amount of manganese, which is.
Speaker 1 (39:54):
Much cheaper and much more plentiful. Those sort of.
Speaker 3 (39:57):
Things will really matter as things go forward in terms
of what's the overall price of these batteries and what's
the technology it's going for. And the last area where
I think there's going to be real innovation is on recycling,
and recycling gets something of a bad rap. You put
your recycling bin out, and who knows where those plastics go.
For the most part, they just get dumped into the trash.
(40:18):
Battery recycling is different between.
Speaker 1 (40:20):
Eighty and one hundred percent of Some.
Speaker 3 (40:22):
Of these minerals can get used over and over indefinitely.
Speaker 1 (40:26):
So if we're talking about cutting China mineral.
Speaker 3 (40:29):
Processing out of the supply chain, the way to do
that is to build batteries that are designed to be recycled.
Speaker 1 (40:35):
And we're designed to be reused because.
Speaker 3 (40:37):
The atoms and these minerals are you know, they're permanent,
and we can take advantage of that.
Speaker 2 (40:44):
Yeah, absolutely so. Earlier we were talking about the price
manipulation challenge, and we talked about the nickel example. There
are many other examples. One of the recommendations that we
dig into this was one of the most interesting conversations
that I remember from our workshopping and stakeholder engagement, was
(41:07):
around this idea of creating a separate American or maybe
North American critical Minerals exchange where we would have more
control over setting the price floor around these critical inputs.
Do you want to dig into that a little bit more.
Speaker 3 (41:25):
Yeah, I mean price manipulation and the price volatility of
these minerals is a huge part of the story, and
you're absolutely right that the industry was focused on that
for very good reason.
Speaker 1 (41:37):
If the price is very.
Speaker 3 (41:38):
High, those who control the key inputs have strategic advantages,
and we saw that early on with lithium.
Speaker 1 (41:45):
But even more damaging could be when the price.
Speaker 3 (41:47):
Goes way low for input like lithium, because then new
lithium production doesn't come online. And that's what we're seeing now.
When you look at some of these mineral producers that
want to build extraction facilities and processing facilities in the US,
they'll tell you there's no profit to be made because
the prices are driven so low, and then they might
(42:10):
go hi. You might start a mine or start a
processing facility, but frequently a processing facility could take a
decade to make, and if the price is going up
and down, you're not able to go from point A
to point B. Even though we know that the demand
for lithium is going to double, is going to triple
in the next X number of years. I mean, the
(42:31):
numbers are really clear, and yet the prices are going
all over the place in the way you would anticipate.
Speaker 1 (42:35):
And if I could just back up for seconds to
tell the lithium story.
Speaker 3 (42:39):
One of the reasons is that the lithium prices aren't
really based on any actual lithium sales. So if you
look at the Chicago Mercantile Exchange or the London Medals Exchange,
their prices come from a company called fast Market, and
fast Market reports its prices based on numbers that Chinese
(42:59):
produce ers to tell them, not based on actual contracts,
because we have no visibility, We have no transparency as
to those numbers. We just have reported prices, and so
China has the power. We don't know whether they're using
it to set the price as whatever they want, and
that that moves off the system through fast Mark into
these merchantile exchanges into futures and derivatives.
Speaker 1 (43:23):
So that capacity.
Speaker 3 (43:25):
To generate market volatility makes it very hard for new
players to come into the market. And that's where you
need something like a new exchange that isn't relying on
these sorts of prices to be able to create some floors.
Speaker 1 (43:38):
On prices and some stability in the pricing of the mammals.
Speaker 2 (43:42):
Yeah, and actually that's a good segue into one more
area of recommendations that I wanted to touch on, which
is really shining a light of transparency on the supply
chains more generally, and we talk about how there are
clear connections between the Chinese supply chains around advanced batteries
(44:06):
and slight labor coming out of Xinjiang and other areas.
We talk about suppressed wages as part of what allows
this model to work, and there are, you know, a
number of other aspects that really point to the opacity
(44:30):
of how these supply chains are working and what the
real implications are not only for US and Western manufacturers
more generally, but for Chinese workers who are behind a
lot of this production cycle. So let's talk a little
bit more about transparency and why this is such a
(44:51):
critical part of thinking through this playbook to push back
against these supply chains.
Speaker 3 (44:57):
Yeah, transparency is really central to how we can take
this fight back to China. It is, as you and
I discuss all the time, it's not a shield for America,
it's a sword. It's a way to attack these practices
that are deeply harmful for the American economy and the
American worker.
Speaker 1 (45:16):
There are a.
Speaker 3 (45:17):
Number of ways in which China leverages its secrecy and
its opacity, so to some extent, as you point out,
forced labor, suppressed wages, and safety issues.
Speaker 1 (45:28):
Again going back to graphite.
Speaker 3 (45:29):
But a number of these minerals are deeply polluting, deeply
harmful for communities. And that's one of the reasons that
they're so cheap, is because waste is just sort of
sluffed off into the sea. I'll point out that that
ocean is connected to our oceans. It's not like they
have their own ocean that isn't impacting all of us. Right,
So that cost is a cost we ultimately pay for.
(45:52):
But the opacity, the inability for companies to say, oh,
this is where my lithium comes from, or to take
the example of cobalt, this is the mind that my
cobalt comes from. Because some of those cobalt minds, you
have children digging in bare feet in piles that are
collapsing all the time. Those sort of practices are happening
(46:13):
because of opacity. We shine a light of transparency on
those practices and the cost of the lithium will be
corrected because we are paying too little because the prices
are cheating functionally.
Speaker 1 (46:28):
But there are other ways in.
Speaker 3 (46:29):
Which transparency is really important too, So we need to,
for instance, in North America, be certain that China isn't
circumventing trade restrictions and using the USMCA our Free Trade
Agreement in North America in ways that are unfair because
they're hiding their facilities under anonymous shell companies or opaque transactions.
(46:51):
So transparency always benefits free markets, the more information the better,
and it always harms state ledoritarian systems. And so when
we really unlock transparency, I am optimistic that we will
do that. That is something that's so clearly in our interest.
We will eventually do that. When we do that, we're
(47:11):
going to give a major boost to American and Allied manufacturers, processes,
and workers, and it'll really harm the Chinese slave and
polluting style of economy.
Speaker 2 (47:24):
Yeah. Yeah, it's nice when the practices that we need
to implement actually align with doing the right thing. We
love it when that happens. So again, like a really
important part of how we're thinking about the playbook. The
final piece that I wanted to talk about on the
recommendations is that, as we say in the report, alas
(47:47):
and partners matter a lot, not only because to some
extent market players share a lot of these challenges of
dealing with a non market actor we've described for the
advanced battery supply chain, but also because there are huge
opportunities to uh, not only create for example, buyers clubs
(48:12):
or other you know, unique ways to create scale within
systems of mining and processing, for example, but also to
have more innovation cycles and deeper co production. You mentioned
North America. We have, of course a very deep co
(48:33):
production system with Mexico and Canada around automotive tech. Uh,
and there's no reason why that couldn't be expanded, if
that makes sense, Uh, you know, in terms of these
advanced technologies which are coming, you know, even if they're
not here with us in full scale in the next
couple of years, they are coming. So let's talk a
(48:56):
little bit about allies and partners and why this is
so critical.
Speaker 1 (49:00):
Yeah, that really brings us full circle to the beginning
of this conversation. But you're right.
Speaker 3 (49:04):
We think of China as this behemoth, as its enormous economy,
and they're really not. They're the second largest economy, but
the US is the first, and our consumer base is massive.
Our economic strength is unparalleled, but our strength with our
allies in combination is astronomical and undefeatable.
Speaker 1 (49:25):
So we need to figure out.
Speaker 3 (49:27):
A way to align with other countries because we are
not the only one facing the risks of Chinese dumping
and over production, IP theft and non market practices. Countries
around the world are getting harmed by that, and we
all share a common.
Speaker 1 (49:43):
Interest not to make America.
Speaker 3 (49:45):
The only player who can defeat China, but a fair
global economy where companies from any country can build the
next technology that drives the economy forward. And that involves
coming up with aligned processes on tariffs and regulation to
push back against China's practices.
Speaker 1 (50:07):
It comes up with doing it.
Speaker 3 (50:08):
It involves having mechanisms for reviewing inbound investments similar to
what we have in Syphius the Committee on Foreign Investment
in the United States. We need systems like that in
all of our allied countries. We need consistent approaches on
what we're doing with pricing and innovation. We need to
be pooling resources on research and development and not think
(50:29):
of thinking of this as that real competitors we need.
Let me rephrase that, real competitors need to work together
to build in a competitive environment. And all of our
allies should be facing all of our allies facing the
same set of circumstances and the same risks, all have
(50:50):
an incentive to build that competitive environment, and that means
pushing back against non market, non competitive practices coming out
of China.
Speaker 2 (50:57):
Yeah. Well, it's going to be interesting to see where
we land on all of this. For sure, this is
a long term playbook, and I think that's something that
we really have to wrap our heads around as Americans.
We move into what is really a global resource war, right,
That's what we see playing out here in terms of
(51:19):
this battery supply chain and what it means for economic security,
for our national security, we really need to start the
conversation about how we get to better long term policy,
how we can make that commitment to support the domestic
players that need to be part of creating that resilience,
(51:41):
and the allies and partners that can create the co
production that should serve us really well as we go forward.
The more that we can trade, the more we can
co produce, the less likely we're going to end up
in a conflict. I think that's without question. So, Josh,
anything else that you want to leave with us before
(52:02):
before we end today's show.
Speaker 1 (52:04):
Well, I think that one thing to remember is that Chinese.
Speaker 3 (52:09):
Non parking practices are bad for American and bad for
the global economy, but ultimately it's also bad for China.
Speaker 1 (52:15):
China has a model that you and I have described
as parasitic. Right.
Speaker 3 (52:20):
They cannot consume enough domestically because their central government holds
too large of a share of their economic power. They
need market economies to thrive. They need our consumer economies.
But that gives the United States and its allies tremendous power,
and we need to be brave enough to use that power,
(52:41):
or we're going to be the victim of the parasite
rather than the one that plucks it off.
Speaker 2 (52:47):
Excellent, thank you, Those are good thoughts to end today's conversation.
For those of you who are interested in reading the
entire report, you'll find it at FDD dot org. That's
FDD dot org. If you have questions or comments about
today's conversation, I would love to hear from you. You
can email me directly at Elaine at elicitedge dot com.
(53:09):
That's Elaine at elicitedge dot com. And don't forget to
visit elicitedge dot com for much more on breaking news,
analysis and resources for financial crime professionals. Thanks for listening,
thanks to our amazing guest Josh Behreenbaum. Hoping you can
come back again and join us on other topics and
we'll see you next time on coercive Capital on the
(53:30):
elicit Edge Network
Today.
Speaker 2 (00:15):
I want to start with a quote from former Senator
Mitt Romney when he was speaking about China round about
twenty twelve, and he said, when a predator unbound by
the rules followed by its competitors is allowed to operate
in a free market, that market is no longer truly free.
(00:35):
He was referring to China. Welcome to a course of capital.
We've got a great show for you today. We're exploring
the world of critical supply chains and advanced batteries. Why
batteries to help answer this question and much more. I'm
joined by my colleague Josh Beerenbaum, Deputy director at the
Center on Economic and Financial Power at the Foundation for
(00:56):
Defensive Democracies. Josh, as he describes himself, is a recovering
lawyer and an expert on anti corruption and financial integrity.
He researches and writes on a broad range of topics
related to global financial reform. We've collaborated a lot over
the years, including on major work associated with Chinese, Belton
wrote initiative Josh, welcome to the show. It's great to
(01:19):
have you.
Speaker 1 (01:20):
Thanks for having me. I'm thrilled to be here, so.
Speaker 2 (01:23):
I'm excited to have you here because we have co
authored a new report which is launching today. It's entitled
Unplugging Beijing, a Playbook to Reclaim America's Advanced Battery Supply Chain.
As we write in our report, advanced batteries are indeed
the bullets of future wars. So today we're going to
talk about why batteries matter, how China has come to
(01:45):
dominate the battery supply chain, and what the US and
allies can do about it. This work is an outgrowth
of our ally shoring initiative at FDD, moving critical supply
chains out of authoritarian regimes, and that early work on
ALI shoring going back to is now coming to fruition
in interesting ways. We talked about the ALI sharing concept
(02:05):
and other segments. We think it's actually a critical component
of rethinking what we've described as the near global economy,
an economy that is driven by democratic principles, an economy
that is driven by free market principles and upheld by
rules that are well understood and certainly not circumvented. So
(02:30):
let's see how much we can get through in the
next fifty minutes or so. We have a lot here,
but I want to start with why batteries matter, Why
they matter for the economy, for security, and for supply
chains of the future.
Speaker 1 (02:45):
It's an excellent question.
Speaker 3 (02:47):
It was one of the first questions we asked, is
what sector do we want to look at here for
this report? The US economy and the global economy more
generally is deeply dependent on China for a number of
key inputs components, goods, and the supply chain vulnerability of
various parts of the economy could have been scrutinized. Transportation, energy,
(03:11):
There are a lot of places where we could have looked,
but batteries really kind of has it all. It has
critical minerals that you're hearing a lot about in the
trade discussions. It has technology that began in the United
States and was sort of scooped up by China and
using a host of non market practices, which we discussed
(03:32):
in the report, they were able to leverage this supply
chain against US, and some of the things that we're
seeing now in terms of export controls and restrictions really come.
Speaker 1 (03:43):
Down to this central technology. And as you.
Speaker 3 (03:45):
Point out, when we started this report, we were in
the Biden administration, and the battery was central to what
the Biden administration saw as an environmental reworking and the
next generation of cars, and that still is true that
those cars from a big part of the battery market.
But in the future, batteries are going to have a
(04:07):
tremendous applications outside of just vehicles, and we're already seeing
that in the defense sector. They're in laptops and cell phones.
This is really an everything type technology, and it's one
that is critically important to the competitiveness of the US
economy going forward.
Speaker 2 (04:26):
Yeah. Absolutely, we have a complicated supply chain, a situation
where the US finds itself in a dependency role across
the entire supply chain from the upstream, the midstream, and
to the downstream. And I want to talk a little
bit about how we've defined the battery supply chain for
(04:49):
this research, because that's an important place to start. So
when we talk about the upstream in the battery supply chain,
we're talking about the critical mineral and other core inputs
into the development of the battery. Okay, so the extraction
and processing. When we go to the midstream, we're talking
(05:11):
about the components of the battery, so the anodes and
the cathodes and the other critical parts that ultimately become
become assembled into the downstream, which is the final battery tech,
which finds its way into lots of applications as you've
as you've mentioned, from evs to drones to energy grids.
(05:34):
So this idea of advanced battery technology becomes a core
component of so many systems and technologies and operations and
supply chains that are critical to how we function as
a society. Right and and again to your point about
(05:57):
you know, we started this conversation talking about ev ease.
You know, evs are having their moment and then not
having a moment, and who knows where we're going, But
this transition to electric batteries is happening that we know
(06:17):
is happening, and we need to understand what the what
the challenges are around that and how to pull that
supply chain into an orbit where we don't face the
risk of an economic competitor cutting off components of that
of that system. So let's talk a little bit about
the upstream, midstream, and downstream and how we see the
(06:41):
risks in the report. So we talk a lot about
the processing choke hold. We talk a lot about minerals
being in certain locations, but kind of walk us through
that assessment if you would.
Speaker 3 (06:53):
Josh, absolutely, so. There are really two separate issues in
the upstream. As you point out, there's the extraction of
the minerals, getting them out of the ground, and then
there's the processing with respect to extraction. The good news
is these minerals are fairly geographically spread over the world.
China certainly doesn't have a head start with respect to
(07:14):
where the minerals are. Many of the best locations for lithium,
for instance, are in South America. The US has tremendous
deposits as well. What China has enabled themselves to do, however,
is to really corner the market on ownership and control
(07:36):
of various minds. So a tremendous number of minds have
been scooped up around the world by China, and in
this year in particular, we actually are seeing China's acquisitions
of minds go up to levels that we haven't seen.
Speaker 1 (07:50):
For five or ten years. They also have a massive.
Speaker 3 (07:55):
Advantage, however, on the processing side, and that's really where
the chokehold becomes very difficult to quickly overcome.
Speaker 2 (08:03):
Yeah, just so our listeners and viewers know what kinds
of minerals are we talking about here.
Speaker 3 (08:10):
Sure, Yeah, So most of the battery technology now is
lithium based, and so lithium is the number one mineral
that's going into the batteries, but key minerals also include nickel, cobalt, manganese, graphite,
and to some extent, there's a cheaper version of batteries
that requires an iron and phosphate mix that has many
(08:34):
fewer restrictions.
Speaker 1 (08:34):
And that's the battery technology that China prefers.
Speaker 2 (08:38):
Yeah, and we'll dig into that in just a minute.
So moving now to the midstream where we're talking about
the anodes and the cathodes and the other critical components.
Why do we have a challenge in the midstream right?
It's not just about extracting the critical minerals, getting them process,
getting access to those, it's also about the reduction of
(09:01):
these midstream components.
Speaker 1 (09:02):
Absolutely.
Speaker 3 (09:03):
So the big two components, as you point out, in
the battery are an anode in the cathode. Cathode is
where most of the cost of a battery comes in.
And China really has the market cornered on those components
the materials that go into it, which of course are
these minerals that are processed and then put together in
very specific ways. China controls ninety seven percent of the
(09:26):
materials that goes into the eNode and more than ninety
percent of what goes into the cathode. So we're really
looking at a complete stranglehold around some of these inputs
that are going into a battery. And this has trickled
down effects when we're trying to build a downstream market.
Speaker 1 (09:41):
Yeah.
Speaker 2 (09:41):
Absolutely, And in the downstream where we're talking about the
final assembly of batteries, this is where we get what
I would call a compounded impact on the supply chain.
Even if batteries are assembled, for example, in California, it
doesn't mean that the midstream components or the critical minerals
(10:02):
that drive the midstream are free of Chinese influence.
Speaker 1 (10:10):
No.
Speaker 2 (10:10):
In fact, it's just the opposite. So by the time
we get to the downstream, it's almost less important where
the batteries are assembled at that point because so much
of the risk is already inherent within the broader supply chain.
Speaker 1 (10:25):
Absolutely.
Speaker 3 (10:25):
I mean, the point is that China can turn off
the tab at any point down the street. If they
turn off the minerals, if they turn off the processing,
if they turn off the components, you can't make the batteries,
and as a result, China has a dominant position on batteries.
There are South Korean competitors and Japanese competitors, and some
efforts at building up a domestic industry in the US,
(10:48):
but Europe recently tried to build a battery industry under
a champion called Northfold and that struggled and went into bankruptcy.
Speaker 1 (10:57):
These are difficult things when you don't control the inputs.
Speaker 3 (11:00):
And one of the things that we can talk about
later is China has a vertical integration across these supply chains,
where one company will often be involved in every component
of the process.
Speaker 1 (11:11):
Up to the battery. US companies generally don't have that.
Speaker 2 (11:15):
Right before we get there, because that's a super important
part of our conversation, I want to talk a little
bit about LFP technology, which is the lithium battery tech
that is really gaining the most traction, particularly for ev applications,
(11:36):
and we have a case study in the report that
lays out what happened with this tech, which by the way,
was developed in the United States and was initially commercialized
by a company called A one twenty three Systems and
in the late two thousands they went through a process
(11:58):
of developed and initial deployment, but ultimately we're unsuccessful in
scaling that technology. And what happened after that is a
fascinating story and maybe a bit of a warning in
terms of how we think about the protection of our
intellectual property going forward.
Speaker 3 (12:20):
Absolutely, I think that there are a lot of lessons
to learn from one to twenty three, and also from
what happened with battery technology in general, Like so many
technologies that were homegrown, we've lost the edge, and we've
lost it in very specific ways, both as a result
of American inattention and because of structural difficulties that happen
(12:42):
when these two competing systems come in contact with each other.
So for LFP batteries, which are one of the two
main chemistries of batteries, and it's the cheaper battery, but
increasingly the equally competitive one, where you're getting the same
(13:02):
number amount of range, the number of cycles of batteries,
the number of times you can charge it is even
greater than the other technology. That technology was invented at
the University of Texas by a person who went on
to win the Nobel Prize for being a core developer
of lithium batteries in general, and it was marketed here.
(13:23):
It was actually able to scale to the point that
it was being put into vehicles and was having some success.
A recall set that back, some other headwinds pushed their
stock price down, and is so often happens.
Speaker 1 (13:36):
In the US.
Speaker 3 (13:37):
A young, juvenile innovator tries to bring a technology that's
cutting edge to the market and the market's not quite
ready for it, and as a result, A one twenty
three goes into bankruptcy and Chinese companies comes in and
scoops the technology out of bankruptcy for relatively small investment.
(13:57):
That technology is now owned in China and it's being
used widely. Now, did that company not invest enough? Did
the US government not invest enough? Why was China able
to do it? It's not that the Chinese system is
better or our system didn't do enough, but these are
just incompatible systems. Where China can put in two hundred
(14:20):
and thirty billion dollars of subsidies support an EV and
battery industry, where the US is putting a couple of
billion dollars, that in balance just creates difficulties in companies
like eighty one twenty three.
Speaker 2 (14:34):
Yeah. Absolutely, And this incompatibility of systems is really a
thematic as we look at the non market practices, and
I want to want to dig into that now as
we think about where where the US has opportunity, but
also how did we end up in a situation which
(14:56):
has really been in development over the last at least
two decades almost three now, So let's talk about this
this incompati excuse me, incombat compatibility of systems and where
where we are now. So we uh, we outline several
(15:18):
of these in the report, and I want to I
want to maybe start with the issue of dumping an
overproduction because this is such a this is such an
important conversation happening right now in terms of trade and tariffs,
and part of what the Trump administration is uh seemingly
(15:38):
responding to with respect to China is a massive amount
of overproduction of everything, including batteries. Right, So we can
dig into this example of batteries as to why this
is such a problem not just for US, but for
any market economy that is trying to get a foot
hold in these advanced manufacturing arenas and finding that it's
(16:04):
one structural impediment after the next in terms of getting
that getting that foothold.
Speaker 3 (16:11):
Yeah, the dynamic really starts with overproduction.
Speaker 1 (16:15):
And overproduction occurs because of certain structural parts.
Speaker 3 (16:20):
Of the Chinese economy, the way that they organize their
economic structure.
Speaker 1 (16:25):
And you and I have talked about this a bunch.
Speaker 3 (16:26):
It's not that the market system in the non market
system is a good guy and bad guy situation. It's
just that when there's a non market player, a player
that doesn't need to worry about profit motive or doesn't
need to worry about, you know, the valley of death
that that startups have to worry about in the US,
it allows them to have certain advantages over market players,
(16:51):
that is, Western multinationals with boards of directors and shareholders
and concerns that that that Chinese companies are free from.
So what happens with China is the central state government
states their growth figures in advance. And that's really peculiar
if you think about it. When you look at US growth,
(17:13):
we see what we sold the year before and then
we give a growth number. In China, it's the inverse.
You say, this year we will have five percent growth.
The last two years that was the target, and that
is a dictate that is pushed down to the local level.
The local governments then build a package of incentives and
structures that guarantee that that number is met, whether it
(17:36):
is economically viable to do that in a Western sense
or not. So this year is an example. Chinese analysts
are saying that they are on pace to make more
than thirty million electric vehicles, even though the entire global
demand last year for electric vehicles was seventeen million, So
they're on pace to double the global demand from last
(17:58):
year according to their figures. Western analysts are a little
bit septical of those figures, putting the number more at
twenty five million, still more than all of the.
Speaker 1 (18:06):
EV sold last year. So why are they making so many.
Speaker 3 (18:10):
They're not going to be able to sell them at all,
and as recent news reports are showing, sometimes they're taking
them off the assembly line immediately marking them as used
cars and selling them as used just to count the
sale for the law government. And the reason is because
you make five percent more than last year, you meet
the growth target.
Speaker 1 (18:31):
And that is why EV.
Speaker 3 (18:33):
Companies across the spectrum in China, battery companies, lithium processing
companies are losing money and it's a process that the
US would not be able to sustain. But because of
the state led system, overproduction is incentivized, and that leads
to what is often called.
Speaker 2 (18:53):
Dumping, right right. And I want to make the point
here that tariffs can be used in a lot of ways,
but I think this is one example of where they
can actually be used effectively and where if we had
more harmonization around the pushback against this overproduction, particularly with
(19:14):
the Europeans, because they're getting a lot of this surplus
EV production, they have a larger market for EV's right now.
Brazil is getting some of that. There are other countries
right that are going to absorb this. We're certainly not
going to be absorbing it. So terffs can be really
effective in that way, but it's not the only thing
(19:37):
that we need to do, because as we talk about
in terms of China's non market practices, they go much deeper.
So beyond the overproduction and dumping of product, we have
monopolies and price manipulation and IP theft, and all of
these things work together in a sense to create this
(20:00):
structural barrier that becomes impossible for any company to compete
against no matter how good their technology is, even if
they're in it for the longer term, because chances are
that the folks in Beijing can probably weigh out that competition.
So I want to talk a little bit more about
price manipulation because this is really a key part of
(20:22):
the upstream risk that we talk about in detail in
the report, and it has to do with controlling so
much of the processing and even a volume of critical
minerals that Beijing is able to play with those prices
in a way that really wreaks havoc for market participants.
Speaker 3 (20:43):
Absolutely, and you're absolutely right that these non market practices
all reinforce one another. They're all building towards this bottleneck,
this choke point of the industry in general, and it
all lends it self towards monopoly power. But going to
price manipulation in particular, it's a fascinating story. We looked
(21:07):
at at two instances where price manipulation was clearly a
risk and vulnerability. So the first one we looked at
was in the nickel industry. Nickel is fairly geographically concentrated
in the best high quality nickel that's used in batteries
usually comes from Indonesia. Of the processing facilities in Indonesia,
(21:31):
seventy five percent of those are Chinese, so the vast
bulk of what is being processed in Indonesia is Chinese owned.
Speaker 1 (21:42):
There is a.
Speaker 3 (21:42):
Meeting that happens in twenty nineteen where a range of
Chinese companies, including chin Chong, the largest nickel producer, meets
with the President of Indonesia and, according to some sources,
encourages the government of Indian Nia to impose a ban
on the sale of raw nickel out of the country,
(22:05):
so that the only players that can process the nickel
are the ones that have facilities inside Indonesia, namely shin
Chong and other Chinese companies. So that goes into effect
at the same time that some mysterious anonymous buyer.
Speaker 1 (22:22):
Purchases a huge.
Speaker 3 (22:24):
Volume of nickel off of the London Mercantile Exchange.
Speaker 1 (22:29):
Let excuse me, the London Metals.
Speaker 3 (22:30):
Exchange, which is supposed to be the repository of where
you go to get emergency supplies of medals and minerals,
and that is intended to sort of flatten out some.
Speaker 1 (22:43):
Of the risk of market cornering behavior.
Speaker 3 (22:46):
Somebody buys what ultimately becomes one hundred thousand tons of
nickel out of the LME and prices skyrocket. The players
that don't have access to processing in Indonia are really
hard hit. And after some time it seems it comes
out that the largest purchaser of those anonymous nickel purchases
(23:10):
off of the LEM was in faction Chong, the nickel
producer that encouraged the band to begin with.
Speaker 1 (23:16):
So these this sort of market manipulation behavior.
Speaker 3 (23:19):
That you that you can infer from this behavior is
really making prices go up and down at whim.
Speaker 1 (23:29):
It's not the last time that huge amounts of nickel
were taken out of the lem.
Speaker 3 (23:33):
Uh At some point, Shinjong purchased so much nickel out
of the LEM that prices fightd four hundred percent in
three days.
Speaker 1 (23:41):
So there's a pattern here.
Speaker 3 (23:42):
And and lithium is a sort of similar vulnerability.
Speaker 2 (23:47):
Yeah, yeah, And so this I think gets to the
heart of you know, this ally shoring question right around
critical minerals and processing to be able to reduce the
ability for any one player. Today it's China, Maybe tomorrow
it's going to be somebody else to control the pricing
(24:08):
in a way that really pushes out market competitors, and
you know, again, this seems like an area where we
could be doing a lot more with allies and partners
if we wanted to take our trade agreements to the
next level, if we wanted to harmonize the way that
we think about extraction and processing and potential to pool demand.
(24:34):
I'm getting a little bit ahead of myself because we're
going to talk about that in the recommendations. But there's
so many opportunities here to really think through, you know,
how to break that choke hold. So some of the
other non market practices that we talk about in the
report include monopolies, aggressive use of vertical integration, and IP theft,
(24:56):
which of course is a well known challenge. I wanted
to talk a little bit about this notion of aggressive
vertical integration and how that's playing out with some of
the major companies in China that now go upstream and
downstream around batteries in a way that is difficult to replicate.
Speaker 3 (25:17):
Yeah, I mean, vertical integration is not a per se
non market practice in the same way that monopolization is.
Vertical integration is allowed in the United States in the
ways that monopolies nominally are not, but it's very rare,
and it's rare because it's not terribly efficient. The most
the most efficient market is one where there are lots
(25:39):
of players, lots of competition, and where you have specialization
to really get the lowest price per component and create
efficiencies over of scale over the whole process. But vertical
integration gives you tremendous market control and power. And so
China's government has enabled degree of vertical integration and incentivized
(26:02):
it in a way that wouldn't make economic sense in
the United States. Tesla is probably the closest example of
a US or Western company that really has attempted to
build some degree of vertical integration.
Speaker 1 (26:15):
But in China it's a whole other level.
Speaker 3 (26:17):
So if you look at BYD, who's known primarily as
a car manufacturer, and a lot of this technology in
the cars is really phone technology, right, you see a
lot of the players in the EV market are just
glorified tablet makers that are turning the tablet as to
the center operating system.
Speaker 1 (26:35):
Of what becomes a car.
Speaker 3 (26:36):
But BYD not only makes the car and distributes them
through its own distribution network, it also makes the batteries.
It's one of the two biggest battery manufacturers in the world.
It has its own minds, It extracts its own minerals,
it processes its own.
Speaker 1 (26:52):
Minerals, it builds the components.
Speaker 3 (26:54):
So really from taking lithium out of the ground and
processing it to putting on the containership and shipping it
all over the world, BID has every element under its control.
And what that does is you cannot have the kind
of leverage against BOID that BID has against its competitors,
(27:16):
and it creates an un level playing field. That's one
of the ways in which vertical integration leads to monopolies.
But as you point out, dumping, and I'd love to
circle back to the ways that we're talking about allies.
You mentioned allies before allies and adversaries. You know, some
of China's friends are getting having to face dumping from
(27:39):
China as well in ways that are helping Chinese monopolies
and hurting their economies.
Speaker 2 (27:45):
Yeah, yeah, absolutely.
Speaker 3 (27:47):
So.
Speaker 2 (27:47):
One of the criticisms, and I think it's a valid one,
is the contrast between what we could call us short
termism when we think about addressing some of these industrial
t challenges versus China's long term view and long term
industrial planning, infrastructure, state sponsored infrastructure. Is this something that
(28:12):
will continue to hamper us? How do you see this?
You know, we've we've been talking a lot about again
the idea of the neuroglobal economy, creating the market rules
by which market players can effectively compete across the board.
But will we get there without a long term industrial strategy.
Speaker 1 (28:34):
Well, I think that we need.
Speaker 3 (28:38):
Industrial elements, industrial strategy elements rights. As our friend Max
Mislesha said, we need an industrial policy with American characteristics.
Speaker 1 (28:49):
We need to.
Speaker 3 (28:50):
Really build our version of industrial policy that looks nothing
like China, because frankly, China's built a system where the
vast number of companies playing are not making money.
Speaker 1 (29:01):
They're money losers.
Speaker 3 (29:02):
That's not how economies should function, It's not how.
Speaker 1 (29:05):
We want the global economy to function.
Speaker 3 (29:07):
So we don't want to match China's number of two
hundred and thirty billion dollars, and we should be pushing
back upon any country that is doing that level of
massive subsidization to the point that profit profits don't no
longer matter. But it's also true that we are very
fickle with companies and that especially small innovators have a
(29:29):
really hard time scaling efficiently, and there are ways in
which the government can help that process and smooth out
some of those bumps that makes it far too likely
that a company like A one to twenty three goes
into bankruptcy. There should in a way that it that
that company could have survived a downturn in its stock
(29:51):
prices in a way that allowed us to retain that
technology here in the United States. And the lack of
scaling support and innovation pooling in R and D techs
right off, these things really add up in a way
that sometimes were tying our own hands.
Speaker 2 (30:09):
Yeah, so I want to go to another potential approach
which has you know, some drawbacks, I think, and it's
about the risk of licensing technology from players like cattle
and others. Let's take the example of the LFP technology,
(30:31):
which has essentially become the global standard, or at least
the China standard, and because they're manufacturing most of the evs,
LFP tech has really come to the floe. It's a
it's a more cost competitive technology, which means that some
of the domestic players have in the US have been
thinking about, you know, whether they need to license that
(30:54):
tech in addition to maybe looking at some alternatives to
other battery chemistries that they've been relying on. But licensing
tech is that a way to get out of supply
chain dependency? And what are some of the risks associated
with that?
Speaker 1 (31:09):
Yeah, I mean there's a there's a lot of pushback
against licensing.
Speaker 3 (31:13):
I think that Ford talked about licensing LFP technology from
Catal and there's a lot of political pushback. And that
makes some sense because in this country it feels like
that's signing up for a dependency, and to some extent
that's true. But it's also true that this technology is
still moving at light speed and a lot of the
(31:34):
things that are licensed today may not be the technology
that we'll see in ten or twenty years. So we're
in a very different situation than we are with say,
internal combustion cars, where the technology has been fairly stable
for the last ninety years.
Speaker 1 (31:50):
We're going to.
Speaker 3 (31:50):
See major changes in a way that make these licensing
agreements I think seem relatively small. That being said, China
has leveraged US IP for decades. I mean, we talk
about IP theft and that's certainly a huge concern. Thousands
of US companies have accused Chinese companies of IP theft,
(32:10):
and there's specific cases of corporate espionage that bear that out.
But there's also been a lot of technology that's been
shifted over to China by what's called knowledge transfer, where
you know, China, a Chinese company, an American company enter into
a joint venture, and some of that technology passes to
China in a sort of aggressive way from the Chinese side.
(32:32):
But there can be ways in which we can learn
as well as teach, and we shouldn't be shy about
learning how to make LFP batteries in.
Speaker 1 (32:41):
An efficient way.
Speaker 3 (32:42):
I also think that again, LFP batteries are right now
stepping stone to where we're going in the future, and
it may be that learning how to make them here
enables us to make the next generation where the IP
will be American.
Speaker 2 (32:57):
Yeah. So I want to shift now to some of
the recommendations that we talk about in the report, and
we can get into some of the details behind these
and how they relate to countering the specific non market
practices that we've touched on and some others that are
detailed in the report. But let's start with the upstream
(33:19):
of the supply chain. So we talk about stepping up
critical mineral extraction and scaling non Chinese processing capabilities, both
in the US and working with trusted allies and partners.
It seems to me that there's some there's some progress
on this front, and it probably started over the last
(33:40):
couple of years with the Biden administration focus on domestic
processing and addressing some of these challenges around mineral extraction.
But it's also been jump started with the Trump administration
coming out with policy on prioritizing domestic mineral extraction, which
(34:02):
actually requires us to rethink some of the timeframes around
how we do this. But let's dig into that recommendation
a little bit more in some of the concrete things
that we talk about, including aspects like permit reform, for example,
which are so so important to speeding up the process.
So you know, we're not talking about ten or fifteen
(34:25):
years to bring critical mineral mining online, but maybe something
more like three to five years and processing capabilities typically
taking what five eight ten years? Moving that to you know,
half of that would be would be a fantastic thing
to achieve. But can we can we get there?
Speaker 3 (34:46):
Well, there's a lot we can do, and it's less
clear where we'll end up, but we know where we
need to start. So as part of the researching the
drafting of this report, we did a lot of work
with industry players to sort of see what the impediments
really work. We held multiple roundtables with a ton of
(35:07):
public and private stakeholders and really spoke with people across
the board, on the processing side, on the EV side,
on the batteries. All of these players sort of shared
a similar story. One is that permitting is critically important.
Permitting makes projects work better, and no one is asking
(35:31):
for permitting to go away. We don't want to build
a system like China. One of the reasons that China
makes ninety five percent of all the graph height in
the world is because the process that they use for
is incredibly harmful to the workers and to the communities.
Speaker 1 (35:44):
They're dumping toxic chemicals right into lakes and rivers.
Speaker 3 (35:48):
We don't want to do that in America, and that
enables China to have very low cost graph height to
put on the global market. But it's not that that's
what we want the long term process to be. So
when we're thinking about making this in the US, we
need to take steps to build a better technology for
(36:08):
that processing and build better systems. But part of that
comes from the permitting. That being said, there's a lot
of good ways to do permitting better than we're doing
it now. We're doing it just about as bad as
we can. There's no reason why we need to have
so many levels or review on the federal, state, and
local level, why we can't have the sharing of approval
(36:29):
from one project to the other in a similar area.
There's no reason that the government couldn't do environmental vetting
of certain known reserves and the region before.
Speaker 1 (36:39):
Projects even get stood up. So there's a lot that
can happen.
Speaker 3 (36:42):
And part of this is also making sure that there's
a venue for community members and for affected stakeholders to
challenge a mind, but that that happens in a timely
fashion because some of the times what you're seeing is
litigation that takes decades.
Speaker 1 (36:58):
Whereas if everybody comes out and.
Speaker 3 (37:02):
Litigates in a single venue at a single time, and
in a rocket docket sort of venue, which is one
that is designed to move.
Speaker 1 (37:09):
Quickly, we can make these projects better but quicker.
Speaker 3 (37:12):
And that's that's something that the US government needs to
work on. And one of the things that the credit
that Trump administration is prioritizing.
Speaker 2 (37:21):
Yeah, absolutely, So I want to move on to the
next set of recommendations around investing in innovation and specifically
around novel battery chemistries. There are some in the industry
who said, the only way we're going to get out
of our dependency on China is to innovate our way
into something new. So something new could look like maybe
(37:46):
a sodium ion battery or other chemistry that significantly reduces
the upstream dependency on certain kinds of critical minerals. Tell
us a little bit more about that, Chad and what
we need to be thinking about in terms of investing
in this area.
Speaker 3 (38:06):
Yeah, I mean, there are so many elements of this
supply chain that are ripe for innovation. And as I
said earlier, this is an area we are seeing leaps
and bounds technologically. I mean, you're really it's like we're
almost in the era of the huge computer that takes
up the whole room. Still we're going to see massive
leaps going forward, and I would want to highlight three
different parts where I would anticipate big jumps. One is
(38:29):
the technology for the processing of minerals. So I talked
about graphite before. We will and need to come up
with better processing intellectual property that's made here in the US,
and it innovates new ways of making a cleaner and
more efficient processing of these critical minerals.
Speaker 1 (38:47):
The second is on the chemistries of the batteries themselves.
Speaker 3 (38:51):
So as you point out, there's sodium ion, So sodium
what you have in table salt is a lot more
plentiful than lithium. It's not as energy dense, but for
applications like an electric screwter, it might work really well.
So that's one path. There's lithium sulfur, which reduces the
cost of cobalt and nickel with a fairly abundant mineral
(39:17):
and has greater energy density itself and has some advantages.
There's solid state batteries, which don't change the chemistry but
are have much larger range and or much more stable batteries.
Speaker 1 (39:29):
And then there are batteries that play with the balance
of these things.
Speaker 3 (39:33):
So cobalt and nickel are expensive minerals and they're very
hard to get. Cobalt is almost exclusively found in the
Democratic Republic of Congo, which is an unstable place where
China has a huge choke hold on mind ownership. But
some of these batteries reduce the amount of cobalt, the
amount of nickel, and increase the amount of manganese, which is.
Speaker 1 (39:54):
Much cheaper and much more plentiful. Those sort of.
Speaker 3 (39:57):
Things will really matter as things go forward in terms
of what's the overall price of these batteries and what's
the technology it's going for. And the last area where
I think there's going to be real innovation is on recycling,
and recycling gets something of a bad rap. You put
your recycling bin out, and who knows where those plastics go.
For the most part, they just get dumped into the trash.
(40:18):
Battery recycling is different between.
Speaker 1 (40:20):
Eighty and one hundred percent of Some.
Speaker 3 (40:22):
Of these minerals can get used over and over indefinitely.
Speaker 1 (40:26):
So if we're talking about cutting China mineral.
Speaker 3 (40:29):
Processing out of the supply chain, the way to do
that is to build batteries that are designed to be recycled.
Speaker 1 (40:35):
And we're designed to be reused because.
Speaker 3 (40:37):
The atoms and these minerals are you know, they're permanent,
and we can take advantage of that.
Speaker 2 (40:44):
Yeah, absolutely so. Earlier we were talking about the price
manipulation challenge, and we talked about the nickel example. There
are many other examples. One of the recommendations that we
dig into this was one of the most interesting conversations
that I remember from our workshopping and stakeholder engagement, was
(41:07):
around this idea of creating a separate American or maybe
North American critical Minerals exchange where we would have more
control over setting the price floor around these critical inputs.
Do you want to dig into that a little bit more.
Speaker 3 (41:25):
Yeah, I mean price manipulation and the price volatility of
these minerals is a huge part of the story, and
you're absolutely right that the industry was focused on that
for very good reason.
Speaker 1 (41:37):
If the price is very.
Speaker 3 (41:38):
High, those who control the key inputs have strategic advantages,
and we saw that early on with lithium.
Speaker 1 (41:45):
But even more damaging could be when the price.
Speaker 3 (41:47):
Goes way low for input like lithium, because then new
lithium production doesn't come online. And that's what we're seeing now.
When you look at some of these mineral producers that
want to build extraction facilities and processing facilities in the US,
they'll tell you there's no profit to be made because
the prices are driven so low, and then they might
(42:10):
go hi. You might start a mine or start a
processing facility, but frequently a processing facility could take a
decade to make, and if the price is going up
and down, you're not able to go from point A
to point B. Even though we know that the demand
for lithium is going to double, is going to triple
in the next X number of years. I mean, the
(42:31):
numbers are really clear, and yet the prices are going
all over the place in the way you would anticipate.
Speaker 1 (42:35):
And if I could just back up for seconds to
tell the lithium story.
Speaker 3 (42:39):
One of the reasons is that the lithium prices aren't
really based on any actual lithium sales. So if you
look at the Chicago Mercantile Exchange or the London Medals Exchange,
their prices come from a company called fast Market, and
fast Market reports its prices based on numbers that Chinese
(42:59):
produce ers to tell them, not based on actual contracts,
because we have no visibility, We have no transparency as
to those numbers. We just have reported prices, and so
China has the power. We don't know whether they're using
it to set the price as whatever they want, and
that that moves off the system through fast Mark into
these merchantile exchanges into futures and derivatives.
Speaker 1 (43:23):
So that capacity.
Speaker 3 (43:25):
To generate market volatility makes it very hard for new
players to come into the market. And that's where you
need something like a new exchange that isn't relying on
these sorts of prices to be able to create some floors.
Speaker 1 (43:38):
On prices and some stability in the pricing of the mammals.
Speaker 2 (43:42):
Yeah, and actually that's a good segue into one more
area of recommendations that I wanted to touch on, which
is really shining a light of transparency on the supply
chains more generally, and we talk about how there are
clear connections between the Chinese supply chains around advanced batteries
(44:06):
and slight labor coming out of Xinjiang and other areas.
We talk about suppressed wages as part of what allows
this model to work, and there are, you know, a
number of other aspects that really point to the opacity
(44:30):
of how these supply chains are working and what the
real implications are not only for US and Western manufacturers
more generally, but for Chinese workers who are behind a
lot of this production cycle. So let's talk a little
bit more about transparency and why this is such a
(44:51):
critical part of thinking through this playbook to push back
against these supply chains.
Speaker 3 (44:57):
Yeah, transparency is really central to how we can take
this fight back to China. It is, as you and
I discuss all the time, it's not a shield for America,
it's a sword. It's a way to attack these practices
that are deeply harmful for the American economy and the
American worker.
Speaker 1 (45:16):
There are a.
Speaker 3 (45:17):
Number of ways in which China leverages its secrecy and
its opacity, so to some extent, as you point out,
forced labor, suppressed wages, and safety issues.
Speaker 1 (45:28):
Again going back to graphite.
Speaker 3 (45:29):
But a number of these minerals are deeply polluting, deeply
harmful for communities. And that's one of the reasons that
they're so cheap, is because waste is just sort of
sluffed off into the sea. I'll point out that that
ocean is connected to our oceans. It's not like they
have their own ocean that isn't impacting all of us. Right,
So that cost is a cost we ultimately pay for.
(45:52):
But the opacity, the inability for companies to say, oh,
this is where my lithium comes from, or to take
the example of cobalt, this is the mind that my
cobalt comes from. Because some of those cobalt minds, you
have children digging in bare feet in piles that are
collapsing all the time. Those sort of practices are happening
(46:13):
because of opacity. We shine a light of transparency on
those practices and the cost of the lithium will be
corrected because we are paying too little because the prices
are cheating functionally.
Speaker 1 (46:28):
But there are other ways in.
Speaker 3 (46:29):
Which transparency is really important too, So we need to,
for instance, in North America, be certain that China isn't
circumventing trade restrictions and using the USMCA our Free Trade
Agreement in North America in ways that are unfair because
they're hiding their facilities under anonymous shell companies or opaque transactions.
(46:51):
So transparency always benefits free markets, the more information the better,
and it always harms state ledoritarian systems. And so when
we really unlock transparency, I am optimistic that we will
do that. That is something that's so clearly in our interest.
We will eventually do that. When we do that, we're
(47:11):
going to give a major boost to American and Allied manufacturers, processes,
and workers, and it'll really harm the Chinese slave and
polluting style of economy.
Speaker 2 (47:24):
Yeah. Yeah, it's nice when the practices that we need
to implement actually align with doing the right thing. We
love it when that happens. So again, like a really
important part of how we're thinking about the playbook. The
final piece that I wanted to talk about on the
recommendations is that, as we say in the report, alas
(47:47):
and partners matter a lot, not only because to some
extent market players share a lot of these challenges of
dealing with a non market actor we've described for the
advanced battery supply chain, but also because there are huge
opportunities to uh, not only create for example, buyers clubs
(48:12):
or other you know, unique ways to create scale within
systems of mining and processing, for example, but also to
have more innovation cycles and deeper co production. You mentioned
North America. We have, of course a very deep co
(48:33):
production system with Mexico and Canada around automotive tech. Uh,
and there's no reason why that couldn't be expanded, if
that makes sense, Uh, you know, in terms of these
advanced technologies which are coming, you know, even if they're
not here with us in full scale in the next
couple of years, they are coming. So let's talk a
(48:56):
little bit about allies and partners and why this is
so critical.
Speaker 1 (49:00):
Yeah, that really brings us full circle to the beginning
of this conversation. But you're right.
Speaker 3 (49:04):
We think of China as this behemoth, as its enormous economy,
and they're really not. They're the second largest economy, but
the US is the first, and our consumer base is massive.
Our economic strength is unparalleled, but our strength with our
allies in combination is astronomical and undefeatable.
Speaker 1 (49:25):
So we need to figure out.
Speaker 3 (49:27):
A way to align with other countries because we are
not the only one facing the risks of Chinese dumping
and over production, IP theft and non market practices. Countries
around the world are getting harmed by that, and we
all share a common.
Speaker 1 (49:43):
Interest not to make America.
Speaker 3 (49:45):
The only player who can defeat China, but a fair
global economy where companies from any country can build the
next technology that drives the economy forward. And that involves
coming up with aligned processes on tariffs and regulation to
push back against China's practices.
Speaker 1 (50:07):
It comes up with doing it.
Speaker 3 (50:08):
It involves having mechanisms for reviewing inbound investments similar to
what we have in Syphius the Committee on Foreign Investment
in the United States. We need systems like that in
all of our allied countries. We need consistent approaches on
what we're doing with pricing and innovation. We need to
be pooling resources on research and development and not think
(50:29):
of thinking of this as that real competitors we need.
Let me rephrase that, real competitors need to work together
to build in a competitive environment. And all of our
allies should be facing all of our allies facing the
same set of circumstances and the same risks, all have
(50:50):
an incentive to build that competitive environment, and that means
pushing back against non market, non competitive practices coming out
of China.
Speaker 2 (50:57):
Yeah. Well, it's going to be interesting to see where
we land on all of this. For sure, this is
a long term playbook, and I think that's something that
we really have to wrap our heads around as Americans.
We move into what is really a global resource war, right,
That's what we see playing out here in terms of
(51:19):
this battery supply chain and what it means for economic security,
for our national security, we really need to start the
conversation about how we get to better long term policy,
how we can make that commitment to support the domestic
players that need to be part of creating that resilience,
(51:41):
and the allies and partners that can create the co
production that should serve us really well as we go forward.
The more that we can trade, the more we can
co produce, the less likely we're going to end up
in a conflict. I think that's without question. So, Josh,
anything else that you want to leave with us before
(52:02):
before we end today's show.
Speaker 1 (52:04):
Well, I think that one thing to remember is that Chinese.
Speaker 3 (52:09):
Non parking practices are bad for American and bad for
the global economy, but ultimately it's also bad for China.
Speaker 1 (52:15):
China has a model that you and I have described
as parasitic. Right.
Speaker 3 (52:20):
They cannot consume enough domestically because their central government holds
too large of a share of their economic power. They
need market economies to thrive. They need our consumer economies.
But that gives the United States and its allies tremendous power,
and we need to be brave enough to use that power,
(52:41):
or we're going to be the victim of the parasite
rather than the one that plucks it off.
Speaker 2 (52:47):
Excellent, thank you, Those are good thoughts to end today's conversation.
For those of you who are interested in reading the
entire report, you'll find it at FDD dot org. That's
FDD dot org. If you have questions or comments about
today's conversation, I would love to hear from you. You
can email me directly at Elaine at elicitedge dot com.
(53:09):
That's Elaine at elicitedge dot com. And don't forget to
visit elicitedge dot com for much more on breaking news,
analysis and resources for financial crime professionals. Thanks for listening,
thanks to our amazing guest Josh Behreenbaum. Hoping you can
come back again and join us on other topics and
we'll see you next time on coercive Capital on the
(53:30):
elicit Edge Network
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