Competing at the Upstream of Innovation: The US-China Balance in Critical Minerals

Abstract

"The United States and China are in the throes of a long-term, peacetime competition. That contest has, thus far, centered on science, technology, and industry. The means deployed have been non-kinetic: export controls, investment restrictions, market protections, and trade remedies. Critical and strategic materials – the upstream of legacy and emerging technological applications – have figured prominently in these peacetime salvos. China and the United States have very different capabilities in critical and strategic minerals. They also have very different approaches to the domain. This paper provides an overview of the asymmetries in strategic orientation defining the critical mineral postures of the US and China; the threats that those asymmetries pose to the United States; and the role that the defense acquisition system can play in facing down those threats. China has an upper hand in critical and strategic minerals. Beijing has proven its willingness to use that upper hand offensively. And China is investing, disproportionately – vis-à-vis its broader science and technology program – in early-stage innovation in minerals and materials that could lock in the PRC’s advantage and disrupt American downstream strengths. This reality poses a direct national security and economic security threat to the United States. Beijing’s market control, pricing power, and distortive effects are such that extant market forces cannot resolve the threat within the current economic order. Despite the severity of this strategic challenge, the defense acquisition system can strengthen US defenses, support and direct early-stage research and development to enhance US strengths, and, ultimately, position to impose costs on China-tied supply chains."