Biden’s Opportunity This Week: Commit To Open Trade With Canada, Lessen Dependence On China

Excitement surrounds the meeting this week between President Biden and Canadian Prime Minister Justin Trudeau on critical minerals cooperation. Transitioning our energy supplies away from hydrocarbons and toward renewable energy sources like wind and solar, as well as lithium-ion batteries to run electric vehicles, is going to take a lot of critical minerals that we don’t have. Extracting useful materials from the earth is done mostly in other countries and refining those raw materials is done mostly in China. Unless Washington works harder to cooperate with Canada and other allies, the energy transition could make us even more dependent on China.

Underneath Canadian soil lies numerous critical minerals needed for clean energy technologies like lithium, graphite, nickel, cobalt, copper and rare earth elements. But leveraging these materials is going to require more investment in Canadian mining and less U.S. trade-policy uncertainty.

It’s not helping that the Biden administration is keeping the populist zeal from the Trump days alive and well. With Buy America provisions and easy use of section 232 investigations, it has gotten all too easy for protectionists to hide behind dubious “national security” concerns. Even our closest allies are raising questions.

From Canada’s standpoint, those US moves bring doubts about their access to the US market and heighten uncertainty, both of which can deter investments in much-needed expanded Canadian mining capacity.

President Biden has an opportunity this week in Ottawa to signal steadfast commitment to Canada as a close ally and a trading partner. A commitment to exclude Canada from trade restrictions could boost investor confidence in Canada and help speed up that needed investment in the mining industry.

This is especially important because, while the U.S. Geological Survey reports that the United States harbors vast mineral deposits, the American public does not seem eager to mine them. We are probably decades from any kind of self-sufficiency — if ever — in the critical minerals and rare earths needed to meet aspirations for an energy transition away from hydrocarbons.

Canada is further along with their mining, though not without their own domestic hurdles. Still, closer trade and investment ties with Canada are a must, including a commitment to exclude Canada from Buy America provisions and other trade policy instruments such as section 232. Some observers interpret the fine print of last year’s Inflation Reduction Act (IRA) to mean that Canada is not affected greatly by these provisions. But an explicit commitment to treating Canada as they were inside the tent would go a long way to assuage those making multibillion-dollar investment decisions and help them open their checkbooks to jumpstart the arduous process to find and exploit underground deposits.

It is hard to overstate the need for critical minerals if we are to pursue the energy transition. Locking in reliable and sustainable sources is a necessary (but not sufficient) step in that direction. A critical minerals club with the EU and others would go a long way, but the partnership with Canada, our close ally and neighbor, should be much stronger.

Canada seems ready to take the next steps. Its government states that it wants to be a global leader in the responsible, inclusive, and sustainable production of critical minerals and secure value chains, from mines to manufacturing. This should be welcome news. Worldwide, the mining for these minerals and rare earths occurs in many places that lack that environmental, labor and social standards that most Canadians and Americans would demand.

There are efforts underway to make mining less devastating for the planet, but many of the world’s mines are in countries that lack laws or rules to prevent devastation. For years, nickel miners in Indonesia dumped tons of mine waste into the ocean, including the Coral Triangle. For the mining industry, ocean dumping can be a cheap and convenient method of disposal.

Large banks like Citigroup C , Standard Chartered and Credit Suisse began to restrict financing a couple of years ago for mining companies that use ocean dumping, which appears to be helping to curb this dirty practice. But the problem persists with mining companies that obtain financing from other sources, like China’s Ramu NiCo, which continues to dump millions of tons of mine waste into the waters of Papua New Guinea. That makes a willing partnership with Canada all the more valuable.

The mining required to meet energy transition goals will be far beyond what the world is doing now. Author and investor Mark Mills noted recently that the energy transition will require the extraction and movement of a quantity of materials equal to or greater than all the materials that humanity extracts, moves and grows for all other purposes combined. Breakthrough innovations may yet be needed to make the transition away from hydrocarbons even possible.

In the meantime, close U.S.-Canada cooperation in mining and refining could help to secure the critical minerals that America needs for its ambitious future.