Image credit: The Verge
by Mark Agnew
September 13, 2021
While our tendency to look at foreign policy skews immediately towards undertaking activities abroad, it can also start closer to home. One of those activities for Canada involves critical minerals.
The issue is getting increased attention for good reason. Critical minerals are essential for the economy’s functioning. To name a few: lithium and cobalt are essential for the production of battery electric vehicles; neodymium is a component used to make magnets in wind turbines; gallium is used for semiconductors and has applications in solar cells and radar missile defence; and scandium has applications for aerospace. There are countless other consumer dependencies, including IT devices.
Yet, these products remain dangerously concentrated. According to the Brookings Institution, 70 per cent of cobalt is extracted in the Democratic Republic of the Congo. Natural Resources Canada reports that China produces more than 60 per cent of the rare earth elements within the critical minerals family. The Congress Research Service states that from 2015-2018, the United States imported 80 per cent of its rare earths from China. The impacts of supply disruptions have been noticeable. For example, when China ceased exports of rare earths to Japan for 59 days, prices increased between 60 and 350 per cent.
Critical minerals are a means for Canada to increase its relevancy on the world stage. Earlier this year, Natural Resources Canada produced a list of 31 critical minerals, including where Canada historically has been a producer or has the potential to produce more. The United States government has also recognized Canadian potential and the first tranche of White House-initiated supply chain reviews highlighted Canada’s importance.
Despite the substantial potential, Canada is not leveraging all the resources at its disposal to make critical minerals a foreign policy tool with a positive contribution to the Western alliance.
Notwithstanding all the hype on critical minerals, Canada lacks an overall strategy to guide its efforts. Work instead occurs in disparate pockets, such as the Canada-U.S. Joint Action Plan on Critical Minerals Collaboration, a Canada-EU strategic partnership on raw materials and geological co-operation with the United States and Australia. The G7 leaders’ communiqué this year also referred to critical minerals.
The time for talk is long past. We need to move to action by bringing something tangible to the table to show our allies that we can deliver the goods. However, Canada needs to develop its domestic supply chains and create the incentives that will sustain domestic extraction and processing to allow downstream manufacturing and integration into finished products.
While a strategy should include many domestic actions, such as tax, regulatory and infrastructure measures, three measures can be enacted in collaboration with allies.
First, Canada should explore with the U.S. how government procurement contracts can be leveraged by building in requirements for North American-sourced critical minerals. Government purchases of equipment for defence and security can fall within the broad application of national security exclusions to show preferences for certain firms. The Canadian and American governments should explore how to adjust their procurement policies to require critical mineral inputs, when possible, to be sourced from North America. Where inputs are not sourced from North America, strict certification requirements should be required to ensure critical minerals are not produced with forced labour, as a pre-condition for securing government contracts.
Second, building on that theme, Canada should work with its allies to establish standards that would ensure critical minerals being imported into industrialized markets are not being produced with forced labour. Canada, the U.S. and Mexico currently ban the importation of all goods made with forced labour, but Canada can be a leader in encouraging other industrialized countries to take similar action.
Last, Canada should co-ordinate with its allies on stockpiling of critical minerals. While the practicalities of jointly managed stockpiles – particularly in all critical mineral products – is a long-term aspirational endeavour, an early step could be for countries in the Western alliance to share information and co-ordinate stockpiling to ensure there are complementary supplies.
Given none of these is a quick win, the new government needs to make an early start if Canada wants to be a critical mineral powerhouse. Successfully executing a strategy to reduce reliance on unstable markets will benefit us and make a tangible contribution to our allies’ benefit, including the U.S.
About the Author
Mark Agnew is the senior vice-president, policy and government relations, at the Canadian Chamber of Commerce.