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Not all allies benefit from a US-Australia minerals deal

May 31


About 53 percent of raw lithium is mined in Australia, and almost all of that is sold to China, where it eventually becomes lithium-ore batteries used in our phones, computers and electric vehicles. But now, the U.S. has reached an agreement with Australia that will help build up a parallel supply chain, independent of China, for processing raw materials.

Straight Arrow News contributor Peter Zeihan takes a look at which U.S. allies will also benefit from this agreement.

Excerpted from Peter’s May 29 “Zeihan on Geopolitics” newsletter:

There’s one massive hole we’ll need to fill if the green movement will ever work in the US…mineral resources. Thankfully we just struck a deal with our Aussie allies, who happen to have many of the key minerals and resources we need.

This deal will enable the Australians to contribute mineral resources to the American greentech industry in a way that will allow them to benefit from the incentives and subsidies in the Inflation Reduction Act (IRA).

While Australia is a significant producer of many necessary Greentech resources, it’s not a one-stop shop for everything. They’re also great at producing the raw ore, but the value-add component isn’t their thing. Thanks to subsidies from the IRA, there will be an opportunity to bring value-add capabilities to the outback.

But what about all the other US allies? Will they be able to tap into this deal? We must remember that there is an inner circle and an outer circle of allies…for now, only the inner circle gets to play.

Hey, Peter Zion here coming to you from chilly Phoenix where it’s a balmy 102

at 10 in the morning, people do it, it’s only May. Anyway, back on May 20 21st, you’re gonna see this a few days later, a big deal of the American struck a deal with the Australians that will allow the Australians to contribute their mineral resources to the American green tech industry in a way that is well benefit from the incentives and the subsidies that are part of the inflation Reduction Act. Others made a real hullabaloo of late about which countries can get access and which can’t. And Australia is a tight ally, it’s part of the inner circle. And most importantly, it has a pre existing free trade agreement with the United States. And so they are the source of roughly half of the world’s lithium, and there are significant preusse producer of rare earths and zinc and copper as well. So this definitely scratches a lot of itches, not all of them, they don’t do molybdenum, they don’t do silver, they don’t do a huge amount of bauxite, although they have some no chromium. So you know, it’s not like this is a one stop shop for everything United States needs. But it’s a real big step in the right direction. Kind of two, follow on thoughts from here. Number one, while the Australians are great at producing the raw ore, they do very little value add themselves. And one of the things that the IRA is attempting to do is to build up a parallel supply chain that’s independent from China for processing of these raw materials into metals, and then on into intermediate products. Australia is a logical place for a lot of that, I mean, yes, labor costs are high relative to other places in the world. But since the minerals are right there, and the energy is cheap, especially if you want to do stuff with solar in the freakin outback. There’s a lot of upward potential, they just need the investment and a decision that they want to move up the value added chain and with the IRA will probably help with that now you’ll have some American Australian fusion projects that are located on both sides of the Pacific. Now, the second thing are the countries that may be able to join the Australians in kind of this inner circle, the United States has a handful of free trade agreements, obviously, the most famous one is NAFTA. And obviously, they already qualify for these incentives. But the US also has trade deals with the Koreans and the Japanese. And in the world to come. These are countries that are involved in manufacturing, they’re gonna do one more and more processing and the value add for things like battery chassis themselves. And so it still needs to me to go shoot it, but it’s starting from a very strong position. And we should expect those to join, who’s not going to join us the European Union. Getting a free trade deal with the European Union has always been something that on both sides of the Atlantic has been flirted with, but it’s never really gone anywhere. A lot of the European countries, most notably the French are highly protectionist. And the idea of exposing themselves to the American market at all is just not something that you’ve been willing to consider. But more importantly, Europe is in demographic collapse. And they’ve simply run out of people who are under age 40, the folks who normally do the consumption. So the United States no longer has any sort of economic rationale for an economic partnership over the long term with Europe, because it would just mean the Europe would be product dumping on the Americans, similar situation for Korea and Japan. But there’s a big strategic argument that these are allies that have to be kept close as part of maintaining a presence in the Asian theater. In the case of Europe, in many cases, it’s a little bit more problem than it’s worth and there while there are independent European powers like the Brits, or maybe the Swedes are in the polls, that may be worth it. If it’s all part of a network of the EU, then the cost is simply too high. So there’s definitely an inner circle and an outer circle among the allies. And when it comes to green tech, only the inner circle complex. Alright, that’s it, everyone. Take care. Bye.



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