EVENT TRANSCRIPT: Decreasing Rare Earths Dependency: How the Five Eyes Alliance Can Minimise Rare Earths Trading Risk with China
DATE: 30th July 2024, 4pm
VENUE: Online
SPEAKERS: Dr Helena Ivanov, Robert Clark, Dr Michael Turner
EVENT CHAIR: Dr Theo Zenou
Dr. Theo Zenou 0:03
Thank you very much for joining us for the launch of a new report by the Henry Jackson Society in conjunction with Freshwater Strategy. We are here to talk about a wonderful new report by Dr. Helena Ivanov, Associate Research Fellow at Henry Jackson Society, titled ‘Decreasing Rare Earths Dependency: How the Five Eyes Alliance Can Minimise Rare Earths Trading Risk with China’. Joining us today are Dr. Michael Turner who is a pollster and a director at Freshwater Strategy, which is a corporate advisory firm in Australia and the UK. Dr. Michael Turner worked with Helena, on some of the key polls in this report. We’ve also got Robert Clark, who has a wealth of experience across think tanks, and expertise in defence and foreign policy, and is a Senior Fellow at Civitas. Dr. Ivanov will go first, the panellists will go after her and then we’ll end with a q&a, but if at any point during the interventions, an idea pops into your mind, just write it down in the chat and we’ll get to it eventually. So please, Dr. Ivanov, get us started.
Dr. Helena Ivanov 1:28
Thank you so much Theo for this introduction, and thanks to Rob and Michael for joining the panel today, and Michael and Freshwater strategy for working on this paper with us. So rare earth elements, or REEs as I’ll occasionally call them during this talk, is definitely not a topic that dominates everyday headlines, or that people or politicians from the left- or the right-wing tend to talk about quite a lot. But, in fact, rare earth minerals definitely do dominate our everyday lives. So, for example, the phone that you’re holding in your hand or the computer through which you’re watching this event just now is something which requires rare earth elements to be created, so it’s a very important industry. It’s used, as I say, in high tech devices that we use on a regular basis, but they also play a very important role in the production of various defence technologies, such as, for example, fighter jets. As we transition towards a greener, more sustainable environment, the role of these rare earth minerals, which are 17 minerals that can be found and used for various purposes, is only expected to grow. Specifically, overall, there is expected that we will see a 400 to 600 percent increase for the demand of rare earth minerals in total; and specifically for lithium, which is used for electric vehicle batteries, some estimates are suggesting that in the next few decades, the demand for this mineral is likely to grow by 4,000%. So clearly, not only are they important right now, but their importance is likely to grow going forward. The problem is, however, that one specific country has emerged as the dominant actor on this market and almost has a monopoly like control over these vital resources; and that is China, which at the moment controls 60% of the global production of rare earth elements, but also 90% of processing, which is why I say monopoly like control over the market. And many, many years ago, initially, this was a very good deal from the perspective of Western liberal democracies and other countries like Australia, New Zealand, etc, which is basically they could access these minerals very cheaply, and they didn’t have to shoulder the environmental burden of mining because that was exactly what China did, which is why initially this Chinese control of these minerals was something which was relatively advantageous for the rest of the world. But in the last few decades, we have seen relations between the world and China deteriorate substantially. We’ve seen China playing a very obstructive role, for example, in the process of imposing sanctions against Russia. We’ve seen China wage trade wars with the West. We’ve seen China waging disinformation warfare across many liberal democracies, which then ultimately created a huge problem that China has such vast control over these critical minerals. Indeed, what added fuel to the fire, when it comes to these concerns, is the fact that China has shown willingness to leverage its control and to abuse its control over the market. For example, it restricted exports to Japan, following certain territorial disputes that it had with Japan, back in 2010. In 2023, which is more recent, it restricted exports of gallium and germanium to the United States, which were used for the creation of computer chips, as another move of escalation in the relations between Washington and Beijing. And basically, many are concerned that, going forward, as the importance of having sustainable access to these minerals increases, that China will increasingly abuse the control that it has, and this is really a big problem for Western liberal democracies. Just to cite you one aspect of this, REEs, as I’ve mentioned, are necessary to produce a lot of military equipment, which means that the supply chains are also highly vulnerable to Chinese decisions to limit REE exports. With no alternative to feed military apparatus so far, North American producers of critical minerals estimate that, should confrontation occur, China could cut short the supply of critical minerals to the United States in an event of war and exhaust the US stock of minerals necessary for its defence apparatus in less than 90 days. So, this is no longer just about whether you’ll have your phone with you; this is a serious national security problem that China has such substantial control over the market of these critical minerals which, by the way, even though they’re called rare earth, they’re actually not rare, they’re more abundant than silver and gold. Subsequently, given this situation, the Henry Jackson Society, in collaboration with Freshwater Strategy, decided to do a report that would investigate how the Five Eyes alliance, which is the intelligence alliance comprising of the United Kingdom, the United States, New Zealand, Australia and Canada, could decrease their dependency on China, what available paths they potentially have to become more self-reliant, and to address this problem. At the moment, at status quo, all Five Eyes, alliance countries are heavily dependent on China for these minerals. For example, half of our REE imports in Canada came from China last year. MPs in the United Kingdom have recently written a letter where they have expressed substantial concern about just how exposed the UK is to the Chinese market when it comes to REEs. The United States of America, for example, which once upon a time used to be the key exporter of these minerals, now imports over 80% of rare earth elements from China. The situation is also not much different in Australia and New Zealand; and, specifically what is odd in this case is that Australia, even though it imports a lot of it from China, also has substantial reserves of rare earth minerals of its own. Now, in the last couple of years, we have seen certain moves towards the right direction, with Five Eyes countries waking up to this reality that such a big exposure to China is indeed a danger and a security threat. So, for example, in 2012, the United States has decided to reopen Mountain Paths mine and to try and ramp up its domestic production. The administration under Donald Trump has agreed that there is a necessity to boost domestic production, and similarly these attempts to boost domestic production have continued under the latest Biden administration. Australia, for example, has invested 500 million Australian dollars to also try and boost its domestic output and to try and emerge as an alternative to China. The United Kingdom has adopted a critical mineral strategy where they’re basically trying to find ways to decrease their dependency on China and to find more secure ways to compensate the needs that they have for rare earth minerals. Canada, similarly, like Australia, has substantial reserves of these critical minerals and has adopted a critical mineral strategy back in 2022 where, again, they’re trying to emerge as an alternative to China. Finally, the New Zealand government has made similar moves as the United Kingdom and is sort of trying to find alternative partners to trade with, whilst also trying to ramp up its domestic production. So, in the last few years, we have indeed seen steps made in the right direction, but we thought maybe this is just not enough, maybe we need to have more collaboration on the Five Eyes alliance level in order to really substantially decrease this reliance that we have on China and ramp up domestic production and have more secure and stable supply chains. To do that in the most effective way, we thought, let’s do the polling. Let’s ask people who actually live in these countries: how do they feel about this problem? Do they believe that the Five Eyes Alliance has the potential to resolve this problem? And would they be interested in seeing more cooperation and the expansion, so to say, of the Five Eyes Alliance, so as to include trade of these critical minerals. And indeed, the data has backed up this idea. To start off with some of the key findings that we’ve had, first and foremost, which I believe is expected, most citizens of Five Eyes countries are unaware of just how much China controls the market. Specifically, around 70%, in all states, where we’ve polled said that they were unaware that China controls 60% of the rare earth elements market. However, when prompted with the actual figure, over 70%, have expressed substantial concern about the fact that China has such a strong control over the market. Moreover, over 60% in all states, and in the United States over 70%, agree that there is a need to reduce dependency on China for rare earth elements. So, it’s not just the fact that they are concerned; the citizens are clearly expressing a desire for something to change, and for this dependency to be reduced. Specifically, a majority, so over 50% in all Five Eyes countries, support their national governments to introduce incentives that would be targeting the mining and processing of REE companies so as to boost domestic production. So, we have a majority of people who are saying give the money to companies, just try and find a way to ramp up our domestic production so that we can reduce our dependency on China. Furthermore, it seems to be the case that the majority of voters are also open to the fact that the Five Eyes alliance should expand so as to include trade of these critical minerals, with an overwhelming majority, over 60%, preferring that they source rare earth elements from within the alliance rather than from China. And not only do voters support this diversification from China but, perhaps most interestingly, the voters are even willing to individually bear the cost of this diversification. Specifically, we have asked people, are you willing to pay a premium on certain products if that meant reducing dependency of your country on China for rare earth elements? And most citizens in all the countries that have been polled have said yes. Of course, for different kinds of goods, the willingness to pay more is different. So, for example, for one-off consumer goods, like iPhones and computers, a majority in all the countries that have been polled said that they would be happy to pay more for their iPhone, if that meant less reliance on China for these critical minerals. So clearly, we have received feedback from the citizens that they are concerned about this dependency, that they want it reduced, and that they want their governments to do something about it, and that they see the potential of the Five Eyes alliance to increase its scope so as to include the trade of these critical minerals. Specifically, in that context, we have asked the people, for example, do they support producing more resources among other Five Eyes countries for use in key technologies, defence and infrastructure? Over 70%, in all respondent countries have said yes. We have asked the people: do they the support encouraging more trade with other five eyes countries to develop products and capabilities relating to electric vehicles and renewable energy generation? Over 65% in all the respondent countries have said yes. And specifically, we have asked should we create a free trading bloc between all five eyes countries? Again, over 60% in all respondent countries have said yes. Finally, we’ve asked do they support expanding eligibility to grants and subsidies to companies in other Five Eyes nations if it means reducing our reliance on China for rare earth minerals? Again, the majority says yes to this question. This ultimately led us to produce two policy recommendations which are on one hand based on the short overview of the research that I’ve given to you, and also the polling that we’ve done. And the two policies that we’re proposing is: one, expand the Five Eyes Alliance. The Five Eyes Alliance at the moment is an intelligence alliance, but we say let’s go a step further, and let’s say this alliance now also involves intra-alliance on trade of rare earth elements. Prioritise the countries individually between themselves when it comes to the trade of rare earth minerals. We think that this is a good thing because, firstly, the capacity is there; Canada, Australia and United States all have the supply of these resources. Of course, they need to ramp up domestic production, but the capacity is certainly there. Multiple different benefits can emerge from this. So, firstly, all of these countries, which are liberal democracies that are generally aligned with each other, would make themselves more resilient from hostile threats like China in this specific case. Two, given the current geopolitical situation, we believe that expanding the Alliance to include trade of REEs would also bring more unity to the alliance, which in the current geopolitical circumstances is also likely to be very beneficial. Thirdly, there are many concerns about the mining consequences to the environment. However, both Australia and Canada have mining companies that generally have the highest possible environmental standards. So again, trading between themselves also means less damage to the environment, as opposed to importing from China. And finally, the notorious human rights and worker standards of Chinese companies would be less of a problem if the Five Eyes countries were to trade between themselves. In terms of how this expansion of the Alliance should look like, we think that there should be a very clear written agreement between the Five Eyes countries where it will be clear that the countries are prioritising intra-alliance trade of rare earth minerals. And we think that the second important step forward would be for all countries of the Five Eyes Alliance to bring about internal reforms that will help them ramp up domestic production. Specifically this means creating effective legal frameworks and streamlining permits, but also introducing legislation which could help increase the operational efficiency of the current mines and obviously, as something which is clearly also supported by the citizens, provide as many incentives to mining and processing companies as possible so as to help them create new mines on one hand and increase the operational efficiency of the ones that we have in place. Our second policy recommendation basically says a lot of this, so the expansion of the alliance and ramping up domestic production, is likely to take time, which doesn’t mean that we shouldn’t do it, we should absolutely do it, but we should also, as a supplementary policy, seek even further alternatives, and, in that sense, three things have emerged. So firstly, the Five Eyes alliance countries could actively seek alternatives from rare earth elements altogether. For example, we have seen that Tesla seems to be suggesting that their new EV batteries are just not going to rely on REEs at all. The second thing is also try and make certain deals with other friendly countries that are known to have substantial reserves of REEs. For example, one of the largest reserves of rare earth elements has recently been discovered in Sweden. So those kinds of partnerships with countries that are politically and otherwise more aligned with Five Eyes alliance in comparison to China. And then, finally, one of the things that’s also emerging as a promising option is E-waste recycling, which, according to some suggestions, could even satisfy a quarter of the global demand for rare earth elements. Ultimately, we think that with these two policies, perhaps we’re not going to be able to squeeze out China from the market altogether, but we should definitely be able to decrease the amount of dependency that we currently have, which, given the relationship with China at the moment, seems vital. To summarise, the world has already once paid a very expensive price for relying on a hostile state for critical resources, like we’ve seen following Russia’s invasion of Ukraine and the price the world has paid for relying on Russian gas. I think the world, and the report finds that the world now, finds itself in a very similar situation with China when it comes to rare earth elements, and this should really be the wake up call and something should be done before it’s too late. And we propose that one of those things that should be done is expanding the Five Eyes Alliance so as to include trade of REEs and also seek other alternatives in ways that I’ve mentioned. I’m going to pause here, and I look forward to hearing what the other panellists think, but also to any of the questions that the audience may ask. Thank you so much.
Dr. Theo Zenou 16:48
So, thank you, Helena, for this overview of your report, and of course, you worked on it with Dr. Michael Turner, who conducted, with Freshwater Strategy, the polling that you quoted earlier. So, Dr. Turner, we would be very interested in hearing more about the polling you’ve conducted and the methodology you use to do so.
Dr. Michael Turner 17:15
Thanks Theo. Thanks, Helena. I think, to start, the point that Helena ended on is an important one, and, ultimately, many of the nations that we did do public opinion within have experienced difficulties as a result of the Ukraine-Russia conflict and global shortages of energy supply that has resulted as a consequence. And I wonder, just to preface the findings that I want to raise on the call today, whether or not some of these findings would have been significantly different should we have done the polling in advance of that event. I definitely believe that the securitisation of parts of our economy are a bit more prevalent in most people’s minds, particularly in the United Kingdom, and Australia, and the US, post-Covid and post then the Ukraine-Russia conflict. So, the study that we did was pretty comprehensive, we spoke to almost 5000 voters across five different nations that form part of the alliance; just over 1000 in each of the United Kingdom, Canada, the US and Australia, and over 500 in New Zealand. Also, we conducted the polls with voters only, and the reason why we did that is because we wanted to keep it contemporary, but also we wanted to keep it focused on legislative issues, and, ultimately, it’s voters that sort of carry the whip in these liberal democracies that we’re polling. The five points that I want to raise really are, firstly, that this is a huge opportunity for, according to these polling results, for the alliance nations to demonstrate their competence in global trade. One of the deficits that the Five Eyes has versus China, in the eyes of voters across all nations in the Five Eyes alliance, is ultimately inability to demonstrate that the Five Eyes alliance can provide a stable trading environment and secure trading environment for the globe. And that was a surprising finding, because it’s certainly one of the key priorities when we asked voters, you know, what’s a top priority for you, you know, across the world. You know, post-Covid environment, we’ve all had a huge disruption to supply chains that we’ve experienced firsthand, like no other decade really in recent memory, and it’s a surprise to see that that’s actually a weak point across each of the five nations. And really, the Five Eyes could do better to say, actually, we can demonstrate our competency. You know, the UK has got an FTA with Australia, you know, the US and Canada obviously have kind of free trading arrangements as well. And ultimately, it’s about just expanding and talking about the benefits of those. And so that’s a huge opportunity for the alliance there to demonstrate. The other thing is just raising the salience. One of the things that voters do believe that Five Eyes nations are really good at is driving prosperity through increased trade and rare earth elements as well. But the salience, the importance of rare earths in improving people’s prosperity, improving their lives, is actually, it’s not so salient, people just forget it, they’re not too aware about the importance that these minerals can provide to improving the quality of people’s lives and their prosperity. And so, this is something really that is a strength for the Five Eyes alliance nations, but it needs to be something that is prosecuted a bit more in terms of connecting these elements and the importance of those in terms of improving people’s lives and how that’s changed. I think the best way to think about this is that, you know, we have our mobile phones, we have our kind of updated latest cars and tech, and we quickly become accustomed to them, and we forget what it’s like to live without them; and really, there needs to be an ongoing level of dialogue with the community, within these nations to kind of remind them, just how important these elements are to improving our lives and what life would be like without them. Anyone who’s taken a long train journey or an aeroplane journey and is pretty plugged into the internet or using your devices, as I am and no doubt many people on this webinar will be, will realise what a shock it is to be without these devices, even for a few hours of the day, unexpectedly. And so, these little reminders are probably a good way to build, to kind of help understand the importance that an organisation like the Five Eyes alliance can actually improve things in this area and the importance of that. The next thing that the research definitely found was is quite surprising, which is that basically, it’s probably no surprise that people aren’t aware that China dominates the global market. I mean, even when we were scoping out this project with Helena at the beginning, I was speaking to friends and family about this, people have no idea what the proportion of dominance in this space that China has, but the minute that you do tell people, it does demonstrate the impact of education on people’s willingness to act in this area, and certainly people’s propensity to want the government to do something to take legislative steps, whether or not that cost them more or not, it increases significantly, once they’re told about the true scale of China’s dominance in this space; and I think more needs to be done just to be able to highlight that. It’s not to say that China shouldn’t be a big player, and people aren’t comfortable with China being a big player. I think it’s once they realise the true scale of how important China is within that they then want that redressing and just balancing out a little bit more. And it’s pretty remarkable to think of some of the smaller nations that many voters believe are major players in this because they’re associated with things like energy, and the myths that are out there basically about who’s a big player in this sort of space. So, telling people the facts in this sort of space greatly helps people’s desire to be able to take action in the legislative space, and they’re willing to pay more. Helena was right, they are willing to pay more. Now, you know, with my pollsters hat on, I would say we do take these things with a pinch of salt. People are willing to pay more, but it’s always a small amount. One of the things that we realised from our examination of, you know, taking on the emissions reduction targets, that many of these western democracies have committed to, is that people are all for them, and, you know, the minute that you put a price on that their overall enthusiasm sort of dampened significantly; once the personal cost is borne out. But we’re seeing in these results, something similar, if not slightly higher level of willingness to pay compared to things like emissions reduction targets. And I fully believe that that’s because of the way in which the public are interacting with the technology, which I’ll come on to shortly, which I think is extremely important. It’s very different from things like emissions reductions targets, which can be quite esoteric and people can’t look and feel and touch it. It’s ultimately just an outcome in most people’s minds, which is distant in the future. And so, one of the challenges about the Five Eyes nations getting the public on board here is going to be inserting the relevance into ordinary public life, you know, in what way are people going to be affected; in what way is life going to be improved if they embark on this. Fourth point I wanted to raise is outside the alliance, and one of the interesting findings here is the consistency with which Japan emerged as a strong sort of sixth partner in the arrangement with Five Eyes nations across all nations, even more so than European Union. We’ve bundled the European Union together as a trading bloc, and ultimately, other than the UK, who saw Japan and the EU very similarly, as you’d expect given its proximity to mainland Europe, Japan has emerged as a significantly higher rated trading partner than the European Union; and they’d be almost seen as reliable as other nations within the Five Eyes network, and certainly the public feel that Japan would make a great trading partner, and a reliable one as well. And that’s obviously testament to brand Japan being highly focused on undisrupted sort of trading and the popularity of their goods and services that they provide. But then, finally, is ultimately this view that the way in which consumers interact with the rare earth elements market is incredibly important, and, actually a key differentiator, it means it’s a really different space to the emissions reduction legislative targets that all five nations have sort of signed up to as part of the alliance. And ultimately, it’s a huge opportunity for Five Eyes nations to connect better with voters about the benefit of enhanced cooperation across the alliance, because I believe that the data shows that the things they’re willing to pay more for the consumer goods that they are much more familiar with and improve their everyday lives. They were computers; they were mobile phones; they were cars; these are things that you’re interacting with every day. And you know, the idea that I might be disrupted or have less high-quality access to mobile phones, or computing technology or sophisticated automotive technology, is just something that I would be much more willing to pay for. And the data is bearing that out in our polling. And that suggests that, ultimately, it’s an opportunity for the securitisation narrative. You know, ultimately, the biggest problems with this aren’t just reliant on mobile phone technology, kit’s also national security through the technology that we rely on for our missile and defence network and what have you, and our satellites that we that we produce. Governments across all five nations can utilise consumers connection to the REEs market through technology to better demonstrate the importance of protecting it better through more cooperation across the Five Eyes lines. So they’re the five things that I wanted to raise from the polling results. Over to you Theo.
Dr. Theo Zenou 28:43
Thank you, Dr. Turner for really breaking down the polling data, that Freshwater Strategy collected and telling us more about the political and geopolitical implications. And now, of course, to give us his insight is Robert Clark.
Robert Clark 29:01
Thank you very much Theo and thank you for Helena as well. I was afforded privileged access to this report a few weeks ago just to give some feedback, and what struck me most was not only how timely this context in the topics we’re talking about are, but the research itself and methodology, which was fascinating, and obviously we’ve just heard about that, so I’m not going to duplicate. What I’m going to spend the next few minutes on is just trying to put this into a broader geopolitical context; why this matters and why this matters now. Like I said, its a crucial time, not only for the topic itself given the rise of China and the dependency that we’re seeing, or the adverse effects that we’re seeing on dependencies on countries, bad faith actors like China and Russia, obviously. Also, in terms of the changing global order, and particularly how we’ve got new governments coming in, in the UK and soon in America. This is an incredibly timely debate. I’m going to start back to front almost on the report’s recommendations is how we’re going to take this. So, the first of the recommendations, I believe, was the idea that we really need to look at how to expand the Five Eyes alliance to also incorporate things like global supply chain resiliency and in critical minerals and rare earth materials. But I think one way of looking at it in the same way, but slightly differently, rather than expanding the Five Eyes alliance, it’s also how we can expand other alliances to include and incorporate the Five Eyes as a separate entity. And here we can really see some options for the UK in particular, where we can take a bit more of a global role in this regard, AUKUS, which I’ll come on to in a minute. But like I say, in terms of the timeliness of this debate, you know, we’re seeing great shifts now how China is dominating multiple industries and even global governance structures to almost erode the traditional rules based order and ultimately supplant it, and replace it with a far more authoritarian one, which will not really constrain its malign intentions on neighbouring partners. Equally concerning, though is far more readily available, we have a situation approaching total warfare on the European continent as Ukraine, which is the first line of the West’s hard defences against authoritarian tyranny. [Inaudible] Russia’s unprovoked and illegal reinvasion. Now Moscow’s wars highlighted two sharp aspects of liberal democracies, their recent complacency, if you like, has been enjoying the fact of the so called, now evidently redundant, ‘end of history’. The first aspect is the almost cataclysmically expensive consequence of allowing authoritarian, despotic regimes to have hegemonic control over critical national reserve resource, energy. And this is of salient importance when we consider China’s equal dominance in the global supply chains of rare earth minerals. The energy market shocks, the rise in supermarket prices, and also the prices of the pumps across Europe; these are going to be dwarfed by the global market shock should the situation deteriorate further between China and Taiwan into a condition similar to that of Ukraine. The second aspect is that of alliances and partnerships. Despite the immense bravery of the Ukrainian people in the moral fighting power that they’ve shown, the situation facing Kyiv would doubtlessly be far more uncertain should Ukraine’s many international allies and partners not have supported it in the way they have. Now our network of alliances and partnerships is an absolute force multiplier, and here the Five Eyes crucially enhances the UK’s capabilities from areas of intelligence gathering, supply chain resiliency, and other such matters of national security. The increased role that this group can have with regards to de-risking from China’s dominance in rare earth minerals is of the utmost importance to each of our nations going forwards. And here, like I said earlier, the UK Government could really have a leadership role for this vital work. What’s exciting from the Five Eyes perspective is the potential for both Canada and New Zealand in particular, to possibly come on board as pillar two partners in AUKUS, which of course already covers the UK, the US and Australia. Last year, both the UK’s House of Commons foreign affairs and defence select committees suggested expanding AUKUS’s pillar activities to other countries, notably Canada and New Zealand, amongst others, including Japan. Ministers of the previous UK government, including both the former defence and foreign secretaries, both supported the potential future partnerships with additional AUKUS partners, including Canada, and like I say New Zealand. Crucially, in its report on defence in the Indo-Pacific published in October last year, the Defence Committee suggested expanding pillar two workstreams to include supply chains for critical minerals and rare earth materials. Now, the most heavily levelled observation of extending pillar two, particularly to Canada and New Zealand, is that each nation must be able to contribute to an enabling AUKUS’s technology and supply chain stream. Canada especially has some of the largest known reserves of rare earths in the world with, you know, vast untapped deposits mentioned in this report, across its immense Arctic landscape, including I think it’s like an estimated 50 million tonnes of rare earth oxide, whilst New Zealand has reserves of monazite, which is crucial for renewable energy markets. From a strategic standpoint, Western nations urgently need to now address the issues that dependencies on bad faith actors like Russia and increasingly China can have on their national security. In this vein, closer collaboration, even expansion of existing partnerships, like AUKUS, for instance, could have directly beneficial gains for all members of the Five Eyes alliance, which remains one of the UK’s most important strategic partnerships, and is only set to deepen in importance as this decade goes on. We can see that last year with the Prime Minister of Australia’s visit to the United States, where he was saying to President Joe Biden just how important rare earth materials are for AUKUS. So, there’s clearly here a gap in the AUKUS alliance on the pillar to where we can start thinking a lot more strategically about supply chains and the trying to de-risk from China’s reliance and dominance on rare earth materials. I’ll leave it at that Theo, for now. Thank you.
Dr. Theo Zenou 35:40
Thank you, Robert, for giving us a political and foreign policy context to the issue of rare earths dependency. We already have several questions, the q&a, but please, by all means do send more if you have any. I’ll start with a question for Helena and Michael actually. Someone’s wondering how did you evaluate the specific risks associated with relying on China for rare earths? Are there any scenarios that you found particularly concerning?
Dr. Helena Ivanov 36:16
Yeah, I can, I can quickly go first and then Michael can go. Well, one of the key scenarios that we’re concerned about is something similar, like what we’ve seen with Russia and gas. So, it’s just about Chinese ability to cut off access very, very quickly, which could then have unforeseeable consequences for the Five Eyes alliance, and, in general, for any country that is currently relying on China. This is not just about, like, how much of those resources you may or may not have, and you may or may not need from China. The fact that China alone is in charge of 90% of processing on REEs means that even if you have your own domestic supply, the chances are it is getting processed over there in China, and, of course, if China was to close the taps, whether on supply or on the processing, or both. As I’ve said, the importance of REES, the fact that it’s used in so many devices that we need on a daily basis on my hand, but also the fact that they play such a big control in the defence technologies on the other, means that both everyday citizens lives could be in jeopardy if the access to our ease was to be stopped, but similarly, the country’s ability to protect themselves would also potentially be in danger. So that’s the kind of that’s the kind of scenario that that we’re thinking about as one of the key risks.
Dr. Michael Turner 37:33
Yeah, and I might add to that, we actually asked voters in all five nations, you know, what is it they felt would happen as a consequence of China’s securing a majority of the world’s rare earth minerals? So yeah, we didn’t tell them, do you agree or disagree with this specifically? Or the likelihood of them? We just said, you know, what do you think would happen? And the top answers that came as a result of that were that they found that across all five nations a clear majority, like about 60% approximately, saying that China will leverage their market power against other countries, and a majority across all nations said that a more powerful presence for China on the world stage would result. And then it gets into more personal consequences. So, for instance, like supply chain disruption, as experienced during Covid, defence systems being compromised, and then higher consumer costs, price gouging. Most consumers don’t like an over concentration anyway, they like competitive markets, because they feel they’re getting a better deal as a result, so we can’t forget that there’s a market component to what we’re talking about as well as a security component to it. So yeah, those were the main scenarios that the voters themselves were thinking about.
Dr. Theo Zenou 38:57
Thank you, Michael. And Robert, someone is wondering, how does the Five Eyes plus Japan, as a block, compare with China in terms of rare earth deposits? Is there enough in the Five Eyes to make this a sustainable shift?
Robert Clark 39:15
Personally, I don’t think there’s enough in the Five Eyes exists to see that sustainable shift that you mentioned. What’s really interesting about that question, I can see it on the screen, is, again, if we slightly reframe that question. So I’ll answer it slightly differently. China’s dominance isn’t necessarily just in its own inherent ability to mine and extract its own resources, it’s also the control it has on an enormous amounts of other countries’ deposits and those exports to China. So, China leverages obviously immense diplomatic influence and power coercive diplomacy. We saw that through COVID. And they do that to leverage these immense wealth of deposits. So, really, it’s not so much just trying to compete with China for our own ability to mine for our own resources, although like I say, Canada in particular has immense, untapped resources, it’s also about how to leverage in particular countries like the UK, our diplomatic influence slightly more strategically. So, for example, one thing that often gets suggested is, rather than handing over enormous sums of international overseas assistance and aid from the UK, is to use it to try and sort of extend our own sort of diplomatic presence a little bit more, like I say, strategically to benefit in the long run. You know, long are the days gone where we see to handover overseas aid and assistance, where there isn’t some sort of like direct benefit to both partners. So I think this is one avenue that really needs to be reconsidered in this context of this conversation and the collective diplomatic weight and heft of countries like the UK, the United States. Still, increasingly Australia and New Zealand, those sort of middle powers, are seen as trusted powers by developing countries where historically, maybe to the US or the UK there’s still a bit of reluctance. They can really sort of outgun and outplay China, particularly when we highlight sort of the fact Chinese diplomacy comes with immense strings attached to, you know, the recipient nation. So, yeah, I think as a as an alliance, as a group of countries plus Japan, and like the question asks, there’s definitely scope to like I say, outgun and outmanoeuvre politically and diplomatically China, for sure.
Dr. Theo Zenou 41:49
So, this actually ties in with another question, which is, are there any obstacles to the recommendation that Helena makes in this report? Helena, what do you think? Are there any challenges that need to be overcome for your policy recommendations to be implemented? And if so, which challenges?
Dr. Helena Ivanov 42:09
Well, you know, there is always going to be, when you want multiple different countries to agree on a certain issue, you can always expect a hiccup here and there in terms of the nitty gritty, the narrowing down of the specific details, etc. But my assumption is that those kinds of challenges can be overcome ultimately, in the end, because we’re speaking about five countries that already are in some form of an alliance on one hand, but also like, generally speaking, politically, economically, and in all other different sorts of ways, these countries have very compatible values and compatible approaches. So, whilst I do think that, you know, getting the nitty gritty sorted out always comes with its own set of challenges, I ultimately believe that they could overcome those. What I do think, that is going to be the most difficult challenge to overcome is time. We really are racing against time overcoming China. Overcoming this dependence on China is simply in and of itself going to take time. Like, for example, ramping up domestic production, both in terms of increasing the operational efficiency of the mines that are operating already, but in terms of also opening up new mines, it just takes a lot of time. Trying to take over the control that China currently has over the processing of REEs, is also going to take time. Even other alternatives that we’ve mentioned in our second policy recommendations, you know, like relying on other friendly countries, and there I’ve listed the example of Sweden, it’s probably going to take 10 to 15 years, until we can actually use the rare earth elements practically that have been identified in Sweden. With recycling, E-waste recycling specifically, again, it is something that is done currently, but at the moment it is very expensive and comes with its own set of challenges. Scientists are only right now working to improve E-waste recycling so that we can potentially achieve that that figure of one quarter of demand for our REEs can be satisfied through recycling. So, I think even if everything is done as efficiently as possible, it’s still going to take a lot of time. And my concern, of course, is that things won’t be done as efficiently as possible. But in terms of what were the key challenges, I would definitely say time.
Dr. Theo Zenou 44:08
Thank you, Helena. And Michael, would you like to share your thoughts and your insights? And Helena mentioned that the race to decrease our dependencies were also a race against time. Did your polling show that people are aware that it’s an urgent matter? Do they rank it highly or at this point, they don’t have a sense of urgency?
Dr. Michael Turner 44:30
Yeah, I think it’s definitely one of those things that is not front of mind and, you know, as I said, people live comfortably and then you remind them and then the importance of that increases dramatically, quite quickly. One thing I would say is, in our experience, to be able to get people to back in support for the legislative changes across different nations, I mean, we’ve done international polling on free trade agreements, you know, which have not necessarily been balanced, you know, around kind of creating an international cooperation around AUKUS for instance, and those sorts of things, which are incredibly popular in its constituent countries, is relevance and letting people know the importance of those things on their own personal lives. If you want to unlock the willingness for action at a cost to people, then you need to demonstrate the importance of that, the impact that will have on their lives. And so, I think there’s one thing that’s critical here, is Robert’s idea about using existing structures that are in place, in order to be able to kind of further advance the Five Eyes alliance goals more quickly, you know, or using a framework like AUKUS and expanding out through that would be incredibly helpful. We know how popular it is. People understand the importance of why rare earth elements security is important in the AUKUS context, and that existing framework is familiar among the public. But also, just reminding people that, you know, they might have a bit more difficulty getting the latest iPhone or a laptop that works, you know, very well and isn’t top of the line, and also their experience in the automotive and technology parts of their lives. So, it’s a communications challenge to be able to unlock the importance of these things. But also, kind of making sure that you’re utilising existing frameworks where possible, to make it as quick as possible.
Dr. Theo Zenou 46:38
Thank you and another flashpoint of rare earths is actually Afghanistan, as Simon reminded us, and he says China possesses huge resources of rare earths in Afghanistan. Are the Five Eyes challenging their domination there. Robert, what can you tell us about Five Eyes’ strategy towards Afghanistan?
Robert Clark 46:59
Yeah, so this was a real sore point with the West. So, the US led withdrawal from Afghanistan in 2021. We were not so much abandoning the Afghans that we were to the Taliban, it was also the fact we were abandoning the country of Afghanistan itself to China more broadly. And this is something I spoke about a lot at the time, which is, to counter the accusation that we have ever failed in Afghanistan, as in the west and NATO more generally, or the fact it serves no further strategic purpose. I countered it by basically suggesting, you know, like, we need to deny Afghanistan to China, at its simplest cause, which keeping a very, very small, limited presence in Afghanistan, which we were perfectly, sustainably doing, would have enabled. It was incredibly telling how only about three or four weeks after the US and British forces left Afghanistan in August 2021; about three weeks later, the Chinese foreign minister no less paid a visit to Kabul to visit the new Taliban regime. And one of the deals that was provisionally struck up was the access that China would have to enormous amounts of Afghanistan’s land for mining. Now, the only counter to that is it’s going to take years, decades, for even China, with a very small, I think, 17 mile land border, to actually successfully mine those kinds of deposits to make it profitable for the Chinese, including immense sorts of security challenges as well. That being said, it was still a huge untapped resource that the West were perfectly enabled to extract far more efficiently, cleaner, and more ethically, than the Chinese will inevitably. So, whilst China doesn’t possess these resources in China, in Afghanistan, sorry, it is well on the way, structurally and within a framework, to do so. And all that will do will embolden the Taliban regime with billions of dollars. I think it’s something like a trillion dollars $1 trillion of untapped minerals in Afghanistan. So, all it’s going to do is basically give a bolt to the Taliban even further and provide them with an enormously long term, sustainable export market to an export partner that will completely turn the other way over the Taliban’s routine and blatant infringement of human rights. So, for all those reasons, I thought that was an enormously missed, sort of, opportunity. Not even opportunity, just an absolute failing of Western policy and the ability to think long term strategically. Thankfully, I think those questions are being re-addressed, now when we talk about this sort of work, and the work that Helena has looked into, in this report; the ability to think longer term, and more strategically in the West than the normal four or five year political cycles
Dr. Theo Zenou 49:59
Indeed, and when we talk about thinking longer term, we also have to think about China and its potential invasion and aggression towards Taiwan. And one of the viewers is asking, Helena, should this recommendation that you’re making work in tandem with a more comprehensive commitment to the defence of Taiwan, given Taiwan’s role in the supply of semiconductors, perhaps even elevating Taiwan to NATO status? What do you think of that?
Dr. Helena Ivanov 50:27
Well, I definitely do think that liberal democracies across the globe really need to find a more comprehensive approach towards China. Of course, we’ve zoomed in on one specific issue, and that specific issue, as we’ve discussed so far in the panel, has consequences that will affect all different aspects of our lives, policy, securities, economies, etc. But generally speaking, rare earth elements are not the only area where liberal democracies across the world find themselves dangerously exposed to China. There are many different areas where very similar scenarios could be applicable. And of course, in the last few years, we’ve seen China’s increasingly abusing that position than it has, becoming more hostile towards liberal democracies across the world. And that relationship is heading for substantial deterioration. And, as of yet, I do not think that countries have found a way how to really properly engage with the potential threat of China. And to answer very shortly, yes, I do think that liberal democracies are in need of finding a more comprehensive approach towards China and not just towards Taiwan, I think just generally finding ways to decrease their dependency on China finding ways to be less exposed to China and Chinese political decisions. And just taking away that substantial leverage that China currently holds is the step in the right direction that liberal democracies in particular across the world, need to start need to start thinking about need to start creating the policies and implementing those policies to make their societies basically more resilient.
Dr. Theo Zenou 51:58
And, Michael, from the polling data that you shared with us, it would appear that if politicians did do what Helena just recommended, they could find public support. However, do you believe that there are more important issues that people would want to focus on? Or is this agenda of containing China, popular enough for a candidate here in the West?
Dr. Michael Turner 52:27
Yeah, I think the first thing is, I think, the idea that, I mean, ultimately, what this paper is arguing, one of the key points, is more friend shoring, right. So more domestic sort of advantages as a result, but also advantages within nations which are very close to the western countries in which we’ve polled. The Taiwanese sort of situation is an interesting one, because ultimately, again, it bears itself out of a monopolistic problem, which is that if 80% of your most sophisticated microchips come from one nation, then it has a massive concentration there that can be easily disrupted. And people will be familiar with the CrowdStrike issue across Microsoft services that happened recently as well. I think ultimately, we’re talking about securitisation of supply, disruption to people’s lives. So, most people would be in favour of diversification. And actually, people are quite willing to pay more for diversification. So, it’s an alternative view to that, this direct and conflictual nature of you know, welcoming an organization, a nation like Taiwan, into NATO and what that might entail. I’ll leave that the details of that over to Helena and Robert. But I think most people see the benefits of spreading around some of the supply chain when it comes to rare earths and rare earth heavily dependent technologies. So, I think there is a lot of support for what Helena is talking about. But I think there is also, to counter the second part of your question, there is a lot of concern around sort of Chinese actions. And so, a containment strategy, for want of the better phrase, is something that often does poll well. But ultimately, most people want to decrease chances of conflict. They’re not looking to be able to run into conflict. So I think there’ll be more in favour of a diplomatic, economic influence maximisation approach, right, where basically, the Five Eyes alliance better use its diplomatic and economic influence across the globe, in a way that Robert was talking, to negotiate better deals, and secure assets, which are, for the most part, not located domestically; they are in places like Africa and Greenland, in Sweden or the Nordic countries. And ultimately being more proactive and competitive in those environments rather than passive, and letting kind of other actors that maybe don’t share our values to take advantage of that, and outmanoeuvre Western nations strategically.
Dr. Theo Zenou 55:43
Yes, there is actually a question here that ties in very nicely. So, if that is implemented, Robert, how long would it take for Western nations to de-risk from Chinese REE supplies to get to a safe position? In other words, if we do do what Helena and Michael discussed, how long is it going to take is it going to take? a year? two years? five years? ten years? fifteen years? And, how long do we really have to be able to do it properly?
Robert Clark 56:08
[Inaudible] That’s the magic question. And unfortunately, I don’t have an answer beyond a simple finger in the air. I mean, it would take way in excess, I think, of five to ten years, a generation really, when we consider just how ingrained and integrated the Chinese economy, supply chains are across Five Eyes nations, critical national infrastructure, exports, and import systems, and trade deals more broadly. On top of that, there is still extreme reluctance across many partnering nations, particularly in Europe, which like would be incredibly reluctant to de-risk, to the extent that this work is quite rightly advocating and promoting or certainly the awareness to think along these lines, and to start the wheels in motion. It will be an incredibly long-term strategy, but that’s why, so as I said a moment ago, this hopefully helps reframe some of these questions away from the traditional four to five year political cycles of decision making in Western countries, which we are, you know, held hostage to, you know. The ability to think longer term than those four or five year election cycles. So, with that in mind, yeah, I mean, it’s not going to be anything in the next five years. But the interesting thing, if you notice, with Chinese foreign policy and Chinese diplomacy, quite often when there are the correct signalling and messages by international actors like the UK, like China, like even the European Union, and particularly Australia, when they signal their intent, politically, then we can see straight away an almost instantaneous Chinese reaction and backlash. And that has the adverse effect that actually emboldens those countries in the first place to carry on that work. Classic example is obviously Australia, when, during Covid, instead of the World Health Organization, they need like an international committee to investigate independent the origins of Covid and China started to sanction incredibly highly Australian beef and wine. So, we can see that those signalling, that messaging actually has the direct effect, ironically, from a Chinese perspective of driving that change further. So yeah, even though it won’t be a short-term fix, you know, these are the right questions that need to start to be to be asked and the right sorts of ideas that need to be promoted further in policy discourse to actually drive it forward. Yeah, for sure.
Dr. Theo Zenou 58:49
Helena, how do you see the future of rare earths playing in the next 15 to 20 years? Do you believe there are politicians in the UK in the US, Australia and so on, who are going to take up the mantle? Or is there still a lot of convincing to do behind closed doors?
Dr. Helena Ivanov 59:05
Well, I think it’s very much going to depend on what Rob just said, which is, are politician going to be able and willing to see beyond the election cycle, and obviously, what kind of problems they will have to deal with during their own term, right, because as I said at the opening, this is not really a topic that dominates everyday headlines, and this is not really a topic that people understand is important. You know that there are many other political issues that you’re more likely to read about in the press or watch on TV or get people passionate about and those tend to be the problems that politicians want to focus on. Those tend to be the problems that politicians put as their priority because those are the things that their voters talk about, and the key aim that any politician has is to get elected or re-elected. So, in that sense, I’m not sure how many incentives there are for this to become the crucial topic but, given the amount of REEs that were going to need and given the current relations with China and the chances of it deteriorating further, I think it is very urgent for everyone to really start dealing with this problem and doing something about it. Otherwise, again, I’m saying I think we had like a trial run so to say with Russia and Russian gas and I’m just quite concerned what the scenario in which this escalates further with China is going to look like, so the time to wake up is now
Dr. Theo Zenou 1:00:26
Thank you, Helena, for this parting word and for sounding the alarm with your report and thank you as well Michael and Freshwater Strategy for all of your insight that you shared with us, and Robert, of course, for your pinpoint analysis, as always. So, we’ve come to the end of our report launch. The report discussing rare earth dependency is available online, I believe on the website of the Henry Jackson society and on X, as well as other social media platforms. Thank you very much for joining us, for sending in your questions, and for starting these debates, and hopefully it will grow much, much further in the month and years to come. So, thanks everyone.
Dr. Helena Ivanov 1:01:10
Thank you.