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TWN
Info Service on WTO and Trade Issues (Oct25/14) Geneva, 22 Oct (D. Ravi Kanth) — United States President Donald Trump and Australian Prime Minister Anthony Albanese signed a “framework” agreement on 20 October ostensibly aimed at “securing supply in the mining and processing of critical minerals and rare earths.” The development appears to be replete with “non-market” intentions and state-led investments in rare earths, allegedly in violation of World Trade Organization (WTO) rules, said people familiar with the framework deal. Even as President Trump has already hinted at the prospect of resolving the tensions over rare earths with his Chinese counterpart President Xi Jinping – following China’s announcement ten days ago of a tough export restrictions regime on rare earths, which closely mirrors US export control practices – Washington is leaving no stone unturned, according to media reports. At the White House on 20 October, President Trump announced that the US and Australia would be signing a contract on critical minerals and rare earths – a key objective for the US as it seeks to reduce its dependence on China. According to media reports, without revealing any details about the deal, President Trump claimed that within a year, “we’ll have so many critical minerals and rare earths that you won’t know what to do with them.” However, on the surface, China appeared to be rather unconcerned by the development. Chinese Foreign Ministry Spokesperson Guo Jiakun said on 21 October that global industrial and supply chains “came into shape as a result of the choices of the market and businesses.” “Countries with critical mineral resources need to play a positive role in keeping relevant industrial and supply chains safe and stable and to ensure normal trade and economic cooperation,” the spokesperson said. The signing of the critical minerals deal was seen as a major strategic win for Australia, reported The Guardian. Significantly, the US and Australia “have decided to promote investment in mining by convening a Mining, Minerals and Metals Investment Ministerial within 180 days of the date of this Framework,” including “bespoke” investment arrangements. The two sides also announced their intention to invest more than $3 billion combined in critical mineral projects over the next six months, the White House said. More importantly, the two countries appear to be zeroing in on a controversial pricing framework “to protect their respective domestic critical minerals and rare earths markets from non-market policies and unfair trade practices, including through the adoption of standards-based systems in which those who adopt the standards can trade freely and within a pricing framework, including price floors or similar measures.” Departing from the neo-classical economic tenet of allowing the market to set prices for critical raw minerals, the two sides aim to establish pricing mechanisms. “The participants will also work with international partners to develop a future global framework to deal with associated international pricing challenges.” The latest bilateral “framework” agreement between the US and its close defense ally Australia “intends to support the supply of raw and processed critical minerals and rare earths crucial to the commercial and defense industries of the United States and Australia.” The two countries claimed that they “plan to accomplish this through the use of economic policy tools and coordinated investment to accelerate the development of diversified, liquid, fair markets for critical minerals and rare earths.” The US and Australia stated that their “objective is to assist both countries in achieving resilience and security of critical minerals and rare earths supply chains, including mining, separation, and processing.” Further, they “intend to capitalize on their respective existing domestic mining and processing operations in critical minerals and heavy and light rare earths, as well as new capacity to be made available in 2026.” COMMON POLICY FRAMEWORK The two countries spelled out an “understanding on a common policy framework for the mining and processing of critical minerals and rare earths.” Several key features of this “understanding” include: 1. Securing supply: The participants are intensifying their cooperative efforts to accelerate the secure supply of critical minerals and rare earths necessary to support the manufacturing of defense and advanced technologies and their respective industrial bases, including by leveraging existing policy tools such as the United States’ industrial demand and stockpiling infrastructure and Australia’s Critical Mineral Strategic Reserve. 2. Investment in mining and processing: The participants will mobilize government and private sector support, including for capital and operational expenditures via guarantees, loans, or equity; finalization of offtake arrangements; insurance; or regulatory facilitation. a. Project selection: The participants will jointly identify projects of interest to address gaps in priority supply chains. b. Financing: In addition to the steps above, within six months of the date of this framework, the participants are taking measures to provide at least $1 billion in financing to projects located in each of the United States and Australia, expected to generate end products for delivery to buyers in the United States and Australia. c. Investment support: The participants will work together to develop new or bespoke mechanisms to strengthen critical minerals and rare earths supply chains. d. Ministerial: The participants have decided to promote investment in mining by convening a Mining, Minerals and Metals Investment Ministerial within 180 days of the date of this framework. 3. Permitting: The participants are taking measures to accelerate, streamline, or deregulate permitting timelines and processes, including to obtain permits for critical minerals and rare earths mining, separation, and processing, within their respective domestic regulatory systems, consistent with applicable law. 4. Price Mechanisms: The participants will work to protect their respective domestic critical minerals and rare earths markets from non-market policies and unfair trade practices, including through the adoption of standards-based systems in which those who adopt the standards can trade freely and within a pricing framework, including price floors or similar measures. The participants will also work with international partners to develop a future global framework to deal with associated international pricing challenges. 5. Asset Sales: The participants commit to working in good faith to develop new or strengthen existing authorities and diplomatic tools that review and deter critical minerals and rare earths asset sales on national security grounds. 6. Scrap: The participants commit to investing in minerals recycling technology and to working together to ensure management of critical minerals and rare earth scrap that supports supply chain diversification. 7. Third parties: The participants will work together with third parties, as appropriate, to ensure supply chain security and utilize existing engagement mechanisms. 8. Geological mapping: The participants will cooperate to assist in mapping mineral resources in Australia, the United States, and elsewhere as mutually determined, to support diversified critical mineral supply chains. 9. Rapid Response: The participants are establishing a US-Australia Critical Minerals Supply Security Response Group under the leadership of the US Secretary of Energy and the Australian Minister for Resources to identify priority minerals and supply vulnerabilities and develop a coordinated plan to accelerate delivery of processed minerals under this framework. GENERAL PROVISIONS The framework agreement also includes general provisions stating that “the appropriate authorities of the participants will carry out post-project analysis and implementation.” “The specific content of the post-project analysis is to be developed between/among the participants, in accordance with their respective domestic laws.” It states that “either participant may discontinue its participation in this framework by giving written notification to the other participant.” In short, the two nations claimed that “the framework sets out a policy and programmatic action plan that does not constitute or create rights or obligations under domestic or international law, does not give rise to any legal process, and does not constitute or create any legally binding or enforceable obligations, express or implied.” China, which has systematically developed the mining of critical raw minerals and rare earths for more than three decades – and is often criticized by Western countries for its allegedly aggressive methods – is in a position where other countries, including the US and Australia, could find it difficult to catch up, said people familiar with the development. Against this backdrop, the US-Australia agreement sends a clear signal that Washington’s Western allies will continue to seek to diversify away from Chinese supplies, including by implementing heavily subsidized, state- led projects – contrary to the rules of the World Trade Organization. At a time when many countries “are struggling to secure buyers outside China for new mineral supplies,” simply “throwing billions at it isn’t going to solve the problem,” said Lian Sinclair, an economic geographer at the University of Sydney’s School of Geosciences, the Wall Street Journal reported. “The major gap is the midstream industry, so we need our allies to build out their manufacturing base.” According to the WSJ report, the Western mining industry also faces headwinds from skilled-worker shortages, strict environmental standards, and frequent opposition from communities or Indigenous groups. “The notion that we can develop these supply chains that we have exited over multiple decades – to rebuild them in years, not decades – it just can’t happen,” said Julian Kettle, vice chairman of metals and mining at Wood Mackenzie. “These processes are complicated.” Australia will provide up to $200 million in financing, while the US will also make an investment, the Australian Prime Minister said. However, the value of the potential US contribution was not disclosed. Gallium, a byproduct of bauxite processing, is rarely recovered outside China because it isn’t especially profitable. Securing new sources of gallium became a priority for policymakers after China introduced export restrictions in 2023 on the mineral, which is vital in the production of semiconductors, defense technologies, and other applications. China accounts for 99% of global gallium output, according to the US Geological Survey. +
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