A note for global joint R&D center for critical minerals

By Song Kyung-jin

Last week, U.S. Treasury Secretary Janet Yellen's visit to China drew keen attention from around the world, as did U.S. Secretary of State Antony Blinken's visit to China last month. Secretary Yellen said at her press conference that the relationship between the United States and the People's Republic of China, which collectively represents about 40 percent of the global economy, is one of the most consequential of our time; therefore, both nations are obliged to responsibly manage the relationship. She also unambiguously stressed the difference between decoupling and diversifying critical supply chains or taking targeted national security actions.

Incidentally, an event occurred three days before Secretary Yellen's visit to China last week, highlighting the importance of diversifying critical minerals supply chains. On July 3, China's Ministry of Commerce and General Administration of Customs announced that from Aug. 1 China's exports of gallium and germanium, and related chemical compounds, will require prior approval from authorities. Gallium is essential for next-generation semiconductors, electronic devices, solar panels and electric vehicles, while germanium is critical for optical fiber communication, night vision goggles and solar cells for satellites.

It came as China's response to the U.S., Japan and the Netherlands' export restrictions on semiconductor equipment to China. This is the first application of China's Export Control Law enacted in 2020 after the U.S.-China competition began intensifying. Prolonged export restrictions will likely cause global price hikes of gallium and germanium and difficulties in the commercialization of cutting-edge technologies.

Changes in the geopolitical and geoeconomic environment may generate more cases of weaponization of resources, such as export restrictions and nationalization, by countries that have dominated the supply chain of critical minerals and rare earths. Moreover, critical minerals and rare earths are absolutely essential for accelerating the Fourth Industrial Revolution and for energy transition to respond to climate change. It is a matter directly impacting the nation's economic growth and competitiveness. Therefore, it is urgent to step up diversification efforts to reduce excessive dependence on a few particular countries.

Cooperation with critical minerals-rich countries is a priority in securing a stable and resilient supply chain. Korea joined the U.S.-led Mineral Security Partnership (MSP) in June last year. During his state visit last month to Vietnam, the world's second-largest reserve of rare earths, President Yoon Suk Yeol signed a memorandum of understanding on the establishment of a Korea-Vietnam critical mineral supply chain center. On June 27, in Ulaanbaatar, Korea, the United States and Mongolia held the first trilateral critical minerals dialogue in which some of the private sector also participated, promising more relevant information exchange and cooperation. Korea is also strengthening cooperation with other critical mineral-rich countries including Indonesia and Australia.

However, there is no one country that can replace China's monopoly position in the supply of rare earths and critical minerals for the time being. From development to production of newly discovered critical minerals, it takes about 15-16 years with current technology available.

Volatilities and vulnerabilities in the supply chain of critical minerals due to geopolitical conflicts between the U.S. and China as well as energy transition and climate change cannot afford to wait another 15-16 years. This is why the development of new and alternative technologies that advance mine development, refining and smelting is more urgent. Sodium batteries using sodium abundant around the world have been developed as substitutes for lithium-ion batteries, but there are still technical limitations in terms of durability, mass production and commercialization. In addition, since critical minerals production is an environmentally unfriendly industry that emits a lot of pollutants, the development of eco-friendly technologies must be carried out at the same time.

Research and development for the development of new, alternative and eco-friendly technologies requires huge long-term investment. Like-minded countries must come together to demonstrate collective leadership and cooperation. I propose the establishment of a "Global R&D Center" for the development of new, alternative and environmental technologies.

Thirteen members of the MSP and/or 14 members of the Indo-Pacific Economic Framework can participate as founding members. In order to prevent any one particular country or two from dominating the scene regarding the purpose and direction of the center, the principle of equal quota and investment by participating countries should be applied. The proposed center can become a genuine example of a global public-private partnership by involving not only their own governments but also related private companies.

Korea, which imports 95 percent of critical minerals, is a suitable candidate to attract this Global R&D Center. Besides, Korea is a non-threatening country. It is safe, clean and affordable. It has a well-equipped infrastructure, abundant human resources and a high level of overall technology. There is no reason for Korea not to step in. Korea, which takes the lead in helping the world to stabilize critical minerals supply chains, will then be taken seriously as a global pivotal state.

Dr. Song Kyung-jin (kj_song@hotmail.com) led the Institute for Global Economics (IGE), based in Seoul and served as special adviser to the chairman of the Presidential Committee for the Seoul G20 Summit in the Office of the President. Now, she is executive director of the Innovative Economy Forum