US North Star is security, again, says Fannon
- 3 December 2024
The countdown is on to Trump 2.0 and, as expected, there were more questions than answers on what will and won’t stay in place from the Biden era on critical minerals at Resourcing Tomorrow 2024 in London. Some things, though, are clearer.
“Every government approaches their role … [with] an organising principle of government as kind of the North Star, which will then inform the decision-making process, particularly in matters of foreign policy [and] in the first Trump administration that organising principle was security,” the first US assistant secretary of state for energy resources, Frank Fannon, said at the conference.
“And as the world's lone superpower it was able to provide a degree of influence in that context of security.
“By contrast the Biden organising principle at the outset was climate change.
“And in order for America to achieve its objectives, which was to mitigate climate change, it actually required more reliance on China, not less, given that they are the dominant manufacturing powerhouse of clean technologies, as well as controller of the critical mineral supply chain.
“It’s a renewed Trump administration but in terms of that organising principle, and the [president-elect's] been very clear on this, it will be back to security.”
Fannon, running geopolitics and energy transition-focused Fannon Global Advisors while he, perhaps, awaits another tap on the shoulder from the US president-elect, was joined on the Resourcing Tomorrow main stage by his successor at the US State Department, Geoffrey Pyatt.
Not literally, of course.
But Pyatt was keen to emphasise areas where the distance between the two was minimal.
“Frank Fannon … spoke of a growing transatlantic awakening regarding the People's Republic of China's aggressive actions and malign activity related to global critical supply chains,” he said.
“Here are the PRC's trademarks: price volatility, widespread corruption, weak labour and environmental standards.
“It's a business model that treats mineral rich countries as extraction sites and the market as something to dominate.
“The United States and our allies want partners. The United States wants fair competition, and the United States recognises that if you want to have energy security you need diversification of supplies and resilient markets.
“That isn't a Democrat or Republican approach to foreign policy. That's an American approach.”
Whether some newly formed partnerships endure under Trump 2.0 is obviously a burning question in Europe, as it is in other parts of the world. As are questions about the ‘T’ word.
Fannon said: “Even though we [USA] might have and do have an amazing minerals endowment, it's the time horizon that's necessary to develop them [new mines]. And that means, again, with security being the North Star, it's going to require investment overseas and partnerships overseas.
“It’s very difficult to create multi-national forums and agreements. It is painstaking work, and it takes far too long to ship. Having done it myself, I have some sympathy for things like the Mineral Security Partnership, but you know, under my time in government, we did create those institutions, those entities, which created a foundation for some of the programs of the Biden administration.
“But the focus was on mobilising capital formation.
“And so I would suspect that you’re going to see a bit of a different approach, which will have the convenings of government to establish those parameters, but there's going to be a focus on action and deployment of capital.
“More convenings and more conferences don't move tonnes.
“Having the meeting is not the outcome. Moving the tonnes and the investment is the outcome.
“So I think that you will see a degree of continuity on some of the international forums and some of the partnerships, but it's going to happen with clearly articulable objectives in terms of development.”
On the moving feast that is tariff speculation, Fannon invoked a somewhat famous movie star.
“President Reagan said, if you want more of something, subsidise it. If you want less of it, tax it.
“The approach thus far has been to create more subsidies and incentivise certain preferred technologies, clean technologies, through the Inflation Reduction Act and other provisions.
“What we haven’t seen is the corresponding tariffs.
“So we've only been developing a race against China, a subsidy race, and that's a race that the US, as well as any free market economy, is destined to lose.
“So the construct of tariffs, in partnership with other incentives, is both sides of that coin.
“[Doing] it in a collaborative way I think can absolutely have a positive impact.
“What is that impact? Back to, what is the question we're seeking to solve for ... I would say it is to improve the security situation of the United States. And that goes to the industrial base, including the development of clean energy technologies, but also things like the defence systems that are required that use some of these key and niche critical metals.
“Unlike what the Chinese just announced on some other metals – restricting – there is not a prohibition against Chinese content coming into the US. The only question, the question before us, is whether the US taxpayer will subsidise an adversarial power's content coming in.
“It's not that we're preventing it from entering the market. It's just, we're not going to subsidise it.
“I think that the American people don't want to subsidise that.
“But there are also real jobs that are being created in part because of some of the new manufacturing that's occurring.
“So what is the composition of the future of the Inflation Reduction Act?
“Other people have commented that they expect it will be changed, as I do agree, but it's whether it will be with a scalpel versus a hatchet.
“I would tend to go more of the scalpel approach.”
Dominic Raab, former deputy prime minister of the UK and now head of global affairs at Appian Capital Advisory, doesn’t see a hatchet in Donald Trump’s hand.
“In terms of the new administration I think you can expect to see some refocusing of the strategy,” he said at Resourcing Tomorrow.
“I don't think you'll see a wholesale reversal because the strategic imperatives of de-risking from China and providing economic security, particularly around critical minerals and rare earths supply chains, are bipartisan,” he said.
“It's interesting the pick of secretary of state in Marco Rubio, who I got to know when I was foreign secretary, because he was one of the co-authors of the Rubio Warner Critical Minerals Act.
“So strategically I think there is a bipartisan support for de-risking and for building up that supply chain security.
“Tactically, in terms of the means to achieve those ends, I think you're going to see some greater emphasis on tariffs [and] tax cuts rather than subsidies.
“Although quite how much the Inflation Reduction Act gets mauled or revised is an interesting question. Eighty per cent of the funding has tended to go to red states.
“I think we'll see certainly a more forward-leaning approach [to] permitting.
“Right now it takes an average of 28 years, I think, to build a mine in the US. They're second slowest [behind] Zambia, I think.
“And that is something actually there’s bipartisan support for. But certainly the president-elect has talked a lot about [it].
“So a refocusing [under Trump], rather than a wholesale reversal.”
