The federal government finally decides to move in the area of strategic minerals. Ottawa has identified 31 of which are significantly produced by China and Russia. These two countries could eventually use these strategic minerals to put pressure on democratic countries including Canada.
Canada’s Natural Resources Minister Jonathan Wilkinson announced investments in the development of cobalt, copper, graphite, lithium, nickel and rare earths. It’s a good start. But this kind of policy has to go beyond natural resources.
Why this sudden awakening of Ottawa?
The war in Ukraine and China’s trade maneuvers to corner essential medical supplies early in the COVID-19 pandemic finally persuaded the Canadian government to act. In fact, China and Russia are putting their dictatorial political priorities ahead of their trade commitments. Gone is the naïve neoliberal view that commercial interests come first.
What else could the government do?
The announced investments are not enough, especially as China controls more and more mines in developing countries, with the declared intention to prioritize the supply of its companies as well as those of its allies.
The new local and regional sourcing policy is consistent with Huawei’s exit from 5G in Canada. If the Canadian government and the governments of other democracies are consistent, this policy can only be the beginning.
Ultimately, all strategic production chains should be returned to democratic countries or safe countries. This trend also seems to be accelerating.
What impact will these decisions have on inflation?
This is bad news for those who believe that high inflation in most democracies will not settle down in the long term. On the contrary, relocating production lines and mines will result in additional costs for years to come.
But at the same time, this shift will help support long-term economic growth. It should also benefit the environment, as transport distances become shorter and manufacturing processes more environmentally friendly.
How far should this policy be implemented?
One of the biggest unknowns remains the impact of high inflation on the population. How much inflation are people willing to endure? To what extent will companies accept that some of their supplies cost more than those of their competitors, particularly the Chinese? Chinese and Russian leaders are relying on Western business lobbies and popular pressure generated by inflation to halt the reorganization of production chains.
What else should Ottawa do?
To be effective, Ottawa’s policy needs to be more elaborate than advertised.
For example, how does the Canadian government intend to promote Canadian mining ownership?
How to ensure that future generations benefit from a significant portion of mining company profits? How to prevent certain particularly polluting exploitations, such as rare earths, from turning into ecological catastrophes, as in the case of the oil sands in the West? What place will Canadian companies take in this global restructuring?
The Canadian government will present its full policy in September. We shall see whether the political will of Justin Trudeau’s government is genuine or superficial.