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TRADING ONE DEPENDENCY FOR ANOTHER

By Nadia SchadlowWar on the Rocks

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Image: Xinhua

Several of the Biden administration’s key climate goals — particularly steps to reduce U.S. greenhouse gas emissions in the power and transportation sectors — are likely to be held hostage by China. A shift away from fossil fuels to renewables to produce electricity, and the deployment of more electrical vehicles on America’s roadways, depends upon batteries. Since China currently controls the entire life cycle of battery development, the Biden administration needs a strategy to mitigate China’s dominant position. While the president’s special envoy for climate, John Kerry, hopes to approach climate as a “critical standalone issue,” the fact is that geopolitics will shape the choices President Joe Biden will have to make. The Biden administration will not be able to “compartmentalize” its climate policies from the overall U.S.-Chinese relationship. China’s strength in the new green industries presents a strategic challenge.

Energy storage has been called the “glue” of a low-carbon economy, enabling the greater use of intermittent power sources such as wind and solar. The World Economic Forum argues that batteries are a critical factor in reaching the Paris Agreement goal of limiting rising temperatures to 2 degrees Celsius. By 2030, it stated, batteries could enable 30 percent of the required reductions in carbon emissions in the transport and power sectors.

Batteries and Bottlenecks

The battery supply chain is complex, but it can be reduced to four key elements: mining the critical minerals, processing them, assembling the battery parts, and recycling.

Under its “Go Out” investment strategy, China has spent the last two decades solidifying control over the main critical minerals for battery cells — lithium, cobalt, and graphite. Beijing now controls some 70 percent of the world’s lithium supplies, much of which is located in South America. More than two-thirds of the world’s cobalt reserves are found in the Democratic Republic of the Congo, and China has secured control over 10 of the country’s 18 major mining operations, or more than half its production. Beijing is also the world’s largest consumer of cobalt, with more than 80 percent of its consumption being used by the rechargeable battery industry. Graphite is the largest component by volume in advanced batteries, but spherical graphite, the kind that makes up the anode in electrical vehicle batteries, must be refined from naturally occurring flake graphite. And China produces 100 percent of the world’s spherical graphite.BECOME A MEMBER

Second, China has developed the largest minerals processing industry in the world. After these critical minerals are mined from the earth, they must be separated, processed, refined, and combined. This process is dirty and environmentally unfriendly. Lithium-ion batteries contain hazardous chemicals, such as toxic lithium salts and transition metals, that can damage the environment and leach into water sources. This is likely a key reason why few processing facilities are located in North America. The critical minerals the United States does mine are often shipped back to China for refining.

According to Benchmark Mineral Intelligence, Beijing also controls 59 percent of global lithium processing, 65 percent of nickel processing, and 82 percent of cobalt processing. And an important aside is that China produces roughly 90 percent of the magnets needed for the motors of electrical vehicles.

As early as 2008, China announced billions of dollars in infrastructure investments in the Democratic Republic of the Congo, by far the world’s largest cobalt producer, in exchange for mining rights. The partnership continues to flourish. In January of this year, the Democratic Republic of the Congo formally joined China’s “One Belt One Road” initiative. The Chinese mining company Tianqi Lithium has acquired stakes in major mines in Chile and Australia, giving it effective control over nearly half the current global production of lithium. China controls even more market share in the refining and processing parts of the mineral supply chain. Together, these state-backed investments have given Chinese battery makers like Contemporary Amperex Technology Co. Limited (CATL) an advantage over Japanese and American competitors.

Third, once these minerals are processed, they are packed into battery cells, which are combined into modules and which, in turn, are wrapped into battery packs. This process takes place in dedicated battery factories called “gigafactories.” Like the rest of the battery supply chain, very few of these specialized factories are located in North America. About 136 of the 181 lithium-ion battery gigafactorieseither planned or under construction worldwide are, or will be, located in China. Just 10 are planned for the United States. An important step in the right direction is General Motor’s consideration of building a second battery factory in the United States — it already has a new facility online in Ohio — but the United States needs to do more.

Finally, once batteries have reached the end of their life cycle, the critical minerals in each cell can be reused. But China dominates the battery recycling industry as well. This is partially because China has built infrastructure to recycle lithium-ion batteries for consumer electronics. In 2019, around 70 percent of lithium-ion batteries were recycled in China and South Korea. And because China is by far the world’s largest electric vehicle market, it will remain a key contributor to lithium battery waste — thus allowing Beijing to recycle at scale.

China has been strategic about building up its recycling capabilities, requiring manufacturers of electric vehicles to be responsible for setting up facilities to collect and recycle spent batteries. As a part of this initiative, automakers were required to establish a maintenance service network to allow consumers to repair or exchange old batteries.Going forward, recycling will only become more important. By 2030, 11 million metric tons of lithium-ion batteries are expected to reach the end of their service lives. Eventually, a robust recycling process could offer a way for countries to mitigate some Chinese-controlled bottlenecks in the supply chain. But taking advantage of this will require environmentally friendly recycling facilities in the United States.

Commanding Heights: Technology and Leverage

China’s dominance across this supply chain should come as no surprise. As in other key economic and technology sectors such as flexible manufacturing, solar panels, and wind turbines, China has achieved dominance by careful planning and investments — as well as unfair practices such as those that led to the dominance of China’s solar panel manufacturing industry. (And it’s worth noting that this issue became one of the most contentious issues between the European Union and China as well.) In addition, many pointed to China’s massive intellectual property theft as a key contributor to its dominance in these key sectors.

Because China takes a strategic national approach, it has been particularly good at identifying key foundational sectors or platforms to grow or control, thereby increasing its economic and geostrategic power. For example, it has used its dominance in financial technologies across Asia to increase the power of its surveillance state by collecting the data associated with payments. It has prioritized 5G, and, with state financing and other forms of support, it has built out its network and is far ahead of the United States in land stations. Notably, this 5G infrastructure will have direct relevance to China’s ability to develop autonomous vehicles, since self-driving vehicles and other platforms, like drones, depend upon the fast connectivity 5G networks provide. (And autonomous vehicles are closely related to the electrical vehicle industry.)

Beijing’s “Made in China 2025 plan,” announced some six years ago, called for major advances in semiconductor fabrication and provided more than $150 billion to support that goal. Some recent reports suggest that China aims to produce some 70 percent of its domestic chip needs within China by 2025 and to reach parity with international technologies five years later. As Jonathan Ward has pointed out, “the mastery of advanced technologies and the creation of a powerful industrial base for civilian and military purposes” are essential pieces of China’s global strategy and activities. While the United States now increasingly recognizes this reality — with legislation such as the Creating Helpful Incentives to Produce Semiconductors for America Act (CHIPS for America Act), as well as executive branch attention by both Presidents Donald Trump and Joe Biden — there remains a far gap between strategy development, desired outcomes, and actual implementation.

Advanced energy is another key platform. Thus, it is not surprising that the “Made in China 2025” plan also included “new energy vehicles” and “new energy” as one of its 10 areas of focus. Beijing considers advanced batteries and electric vehicles a key strategic sector worthy of extensive industrial planning. One report noted that, in the science and technology sector alone, the Chinese Communist Party has issued as many as 100 plans. Several of these, including its 2011 strategic emerging industries plan, focused on key strategic sectors, including the “new energy automobile industry.” In 2017, General Secretary Xi Jinping released an Outline of the National Strategy for Innovation-Driven Development that includes differentiated strategies to produce “modern energy technologies.” And China is using its “One Belt One Road” framework to make strategic investments around the world and vertically integrate its supply chain for battery production.

The Chinese Communist Party has recognized that pressure to address climate change will prompt a shift toward renewable energy around the world. With a regulatory push across Europe, some expertsanticipate that, by 2040, about 70 percent of all vehicles sold in Europe across different segments will be electric. Others believe that the global electric vehicle market — about $250 billion today — will grow to almost $1 trillion by 2027.

China has positioned itself well for this transition. On the one hand, China will have the benefit of cheap fossil fuels. China will not even begin to reduce its own carbon emissions for another 40 years, until 2060. It continues to build coal plants around the world. (In 2016 alone, Chinese development banks invested $6.5 billion in coal infrastructure overseas, mostly in neighboring developing countries). On the other hand, the Chinese Communist Party has positioned itself at the center of a global energy revolution.

If anyone has doubts about the determination with which this might unfold, China’s automobile market was virtually nonexistent until the early 1990s but surpassed the United States in 2009 to become the world’s largest.

Rewiring the global energy economy around China would provide Beijing with massive economic benefits. Experts have pointed out that China’s focus on energy security and technological self-reliance are key factors informing Beijing’s aim to reach carbon neutrality by 2060. Chinese ministries have estimated that achieving this goal could lead to over RMB 100 trillion ($14.7 trillion) in investments over the next 30 years.

As a result, China has made significant advances in energy storage, leading Europe’s top automakers to move most of their research and development operations to China. Since 2018, the largest European carmakers (BMW, Daimler, FCA, Groupe PSA, Renault, Volkswagen, and Chinese-owned Volvo) have chosen Chinese partners for 41 cooperation projects. And European carmakers have also directly invested in their own research and development centers in China, establishing nine such centers since 2018.

Whatever the real intentions behind General Secretary Xi’s effort to put China at the center of an “an ecological civilization,” it is shortsighted and ahistorical to think that China will not use this leverage. It has done so in the past. In 2010, a Chinese fishing boat rammed two Japanese coast guard vessels in the contested waters of the East China Sea. When Tokyo arrested the fishing boat’s captain, the Chinese Communist Party retaliated by placing an embargo on rare earth sales to Japan.

More recently, in June 2019, Chinese state-controlled media threatened disruption of rare earth supplies to the United States — this time targeting U.S. defense contractors. The threat noted that “military equipment firms in the United States will likely have their supply of Chinese rare earths restricted.” This past February, China threatened to use export controls to cut off U.S. access to the equipment used for processing rare earths, a ban that would be as devastating as cutting off production of rare earths themselves. And Australia is feeling such pressure as China has restricted imports of Aussie beef, wine, and barley — and reduced the flow of Chinese students to Aussie universities — unless Australia submits to a list of 14 politicaldemands by Beijing.

This behavior is consistent with China’s use of “sharp power” — diplomatic, economic, or technological coercion — to pursue its policy objectives. This fall, China passed its first unified export control law, allowing the Chinese Communist Party to control the export of items including very broadly defined “dual-use goods” to specific foreign entities. As the Merics institute has pointed out, any exports that fall under “overall national security” — and the law appears intentionally vague — could be prevented, thus allowing Beijing to retaliate against countries or companies for policy disagreements or geopolitical reasons. Given Beijing’s designation of the electric vehicle and battery sectors as strategic industries, the Chinese Communist Party could potentially weaponize key bottlenecks in the supply chain against the United States.

Biden’s Challenge

For much of 21st century, the United States was dependent upon the Middle East for oil. As the Biden administration seeks to shift to renewables and reduce carbon emissions through the deployment of more electric vehicles, it should not trade one dependency for another. As one expert group put it, the modern-day arms race revolves around super-sized lithium-ion battery cell manufacturing facilities and the mineral supply chains to support them.

Any successful effort to “position America to be the global leader in the manufacture of electric vehicles and their input materials,” as Biden has stated, cannot be based on a dependency on the United States’ most serious competitor. Rather, the United States should understand that American efforts will be contested — even if they are intended to help the “global good” of reduced carbon emissions. It is highly unlikely that Beijing, which has been working for years to “seize the commanding heights” in critical technologies such as batteries, will easily watch as its advantages melt away. In the eyes of the Chinese Communist Party, the battery race means that China and the United States are locked in a battle over market share and access to scarce resources.

Chinese Foreign Ministry spokesman Zhao Lijian has already reminded U.S. leaders that U.S.-Chinese cooperation in specific areas is interrelated and subject to the overall U.S.-Chinese relationship. Maintaining dominance in battery production — particularly as the world increasingly relies on batteries — provides Beijing with valuable geopolitical leverage. While the Biden administration would like to compartmentalize climate change and geopolitics, the likelihood of China not doing so is high.

Moreover, as Biden seeks to build technology alliances with Europe and other allies to counter China, China’s efforts will constrain his leverage. With European electric vehicle manufacturers dependent upon China, it is hard to imagine that the Chinese Communist Party will not use these dependencies to ask for concessions in other domains.

To avoid a potentially debilitating dependence on China, then, the United States should treat clean energy technologies as a competitive space.

The Biden administration cannot afford to start from scratch and should build on the work of its predecessor. As it begins its new supply chain review, of which advanced batteries are one part, it should keep in mind the lessons of the Obama era battery initiative. In 2009, the Obama administration announced $2.4 billion in funding to produce next-generation hybrid electric vehicles and advanced battery components. One goal at the time, was to “end our addiction to foreign oil” through a plan that “positions American manufacturers on the cutting edge of innovation and solving our energy challenges.” As part of this, the Department of Energy offered up to $1.5 billion in grants to U.S.-based manufacturers to produce these batteries and their components. So what happened to these efforts and others like it over the past decade? Without setting forth what went right and what went wrong, it is hard to see how new initiatives can make progress.

How will Biden’s current efforts to use green technology to stimulate the economy differ from past failed efforts? Despite a string of incentives in the stimulus act in 2009, the solar supply chain largely moved to China after that country’s government invested heavily in the industry.

In addition to specifying lessons learned from past efforts, any future policy initiatives  should take advantage of existing recent efforts. For example, Ellen Lord, the former undersecretary of defense for acquisition and sustainment, devoted significant time to identifying investment priorities, including the battery network. Since it takes five to seven years from the start of planning a battery-manufacturing plant and setting up a pilot production line to reach full operational capacity of a gigawatt factory that can produce several gigawatt-hours per year, the administration needs to concentrate some of its efforts on existing facilities, while encouraging new investments by U.S.- and foreign-owned suppliers.

The Biden team will also need to make choices, and fight for them internally. If the United States is to increase its processing of minerals for batteries in the United States, it will need to overcome the fact that such processing facilities are environmentally challenging. That tradeoff is worth it.

The new administration can make progress on its climate goals, but doing so will require a serious dose of climate realism, as well as a concomitant commitment to competitive policies to achieve U.S. independence from China in battery technology and manufacturing.


Murdoch unloads on Kerry, Obama, the left

By Blake Hounshell     •     Politico

News Corp CEO Rupert Murdoch, in a discursive speech Monday evening, blasted Secretary of State John Kerry and attacked the left for creating an “identity crisis” that he charged has undermined American strength and fostered terrorism around the world.

And he drew a connection between U.S. foreign policy and domestic culture, arguing that “in recent years, there has been far too much institutionalization of grievance and victimhood.”

The Australian-born media mogul, a naturalized U.S. citizen, also touched on the Republican presidential primary, which he said “has articulated a deep distaste for the slow descent of our country.” Continue reading


John Kerry Is a Disgrace

by Charles C. W. Cooke     •      National Review

John KerryLadies and gentleman, your Secretary of State, Mr. John Kerry:

In the last days, obviously, that has been particularly put to the test. There’s something different about what happened from Charlie Hebdo, and I think everybody would feel that. There was a sort of particularized focus and perhaps even a legitimacy in terms of – not a legitimacy, but a rationale that you could attach yourself to somehow and say, okay, they’re really angry because of this and that. This Friday was absolutely indiscriminate. It wasn’t to aggrieve one particular sense of wrong. It was to terrorize people. It was to attack everything that we do stand for. That’s not an exaggeration. It was to assault all sense of nationhood and nation-state and rule of law and decency, dignity, and just put fear into the community and say, “Here we are.” And for what? What’s the platform? What’s the grievance? That we’re not who they are? They kill people because of who they are and they kill people because of what they believe. And it’s indiscriminate.

When I first saw the key line here — “there was a sort of particularized focus and perhaps even a legitimacy in terms of – not a legitimacy, but a rationale” — I thought that Kerry had likely been misquoted. Alas, he had not. In fact, his words are even worse in context.

There really is no way of reading these comments other than as a craven ranking of outrages. Forget Kerry’s brief flirtation with the word “legitimacy” and assume that he said “rationale” from the start. That changes precisely nothing. The top diplomat in the United States just publicly argued that because the victims at Charlie Hebdo had spoken risqué words but the victims at the Bataclan had not, the violence against the former was more comprehensible than the violence against the latter. Has he lost his mind?

Even if Kerry’s assumptions were all correct, the moral problem here would be obvious. We hear a great deal about “blaming the victim” in our domestic debates, especially as it relates to sexual assault. Does this not apply to other realms? In essence, the American Secretary of State just announced before the world that he could grasp why the woman in the short skirt was raped but that he had been left scratching his head by the attack on the woman in the pantsuit and the overcoat. “Sure,” he said, “I get why they knocked off the hate speakers, but why would they go after progressive kids at a concert? Now things are really serious.”

In and of itself, this assessment is abhorrent. But he also screwed up the facts. Implicit in Kerry’s reasoning is the assumption that the perpetrators of the attacks against Charlie Hebdo had a clear purpose whereas the perpetrators of last week’s abomination did not. Or, as he put it, that in one case the killers were “really angry because of this and that,” but that in the other they were not. But this isn’t true. In fact, both set of attackers gave reasons. With Charlie Hebdo, the killers’ purported motive was revenge against ”blasphemous” expression; in Paris last week, it was disgust at Paris’s reputation for “obscenity.” In consequence, there are only two choices here: Option 1) That John Kerry believes that killing people for speaking rudely is more understandable than killing them for being secular; or Option 2) That John Kerry doesn’t actually know what the most recent attackers used as their justification (and also doesn’t remember that at the same time as the Charlie Hebdo assassinations, associated gunmen targeted a market simply because its owners were Jews).

Despicable.


U.N. Planning Court to Judge U.S. For “Climate Justice”

Stealth agenda to issue rulings on debt, finance, tech transfers

by Leo Hohmann     •     WND

At the upcoming United Nations Climate Summit in Paris, participating nations have prepared a treaty that would create an “International Tribunal of Climate Justice” giving Third World countries the power to haul the U.S. into a global court with enforcement powers.

Congress would be bypassed – left out in the cold – by this climate deal, critics say.

Policies once left to sovereign nations could be turned over to a U.N. body if the U.S. and its allies approve the proposed deal in Paris during the summit scheduled for Nov. 30-Dec. 11.

According to the proposed draft text of the climate treaty, the tribunal would take up issues such as “climate justice,” “climate finance,” “technology transfers,” and “climate debt.” Continue reading


Kerry: US and Iran Disagree on Definition of Terrorism

by Alyssa Canobbio     •     Washington Free Beacon

During Tuesday’s House Foreign Affairs Committee hearing on the Iran nuclear agreement, Rep. Alan Grayson (D., Fla.) asked Secretary of State John Kerry if the implementation of the deal would increase Iran’s support for terrorism.

Kerry said that the United States had no way to know that if the deal is implemented whether Iran would continue to support terrorism because of the difficulty of defining terrorism itself.

Iran is a leader in the state sponsorship of terrorism and the deal includes a transfer of $140 billion.

“They [Iran] are committed to certain things that we interpret as terrorism, they don’t, and we’re going to continue to conflict on those issues,” Kerry said.


The Worst Agreement in Diplomatic History

By Charles Krauthammer     •     Washington Post

Obama Iran Nuke DealThe devil is not in the details. It’s in the entire conception of the Iran deal, animated by President Obama’s fantastical belief that he, uniquely, could achieve detente with a fanatical Islamist regime whose foundational purpose is to cleanse the Middle East of the poisonous corruption of American power and influence.

In pursuit of his desire to make the Islamic Republic into an accepted, normalized “successful regional power,” Obama decided to take over the nuclear negotiations. At the time, Tehran was reeling — the rial plunging, inflation skyrocketing, the economy contracting — under a regime of international sanctions painstakingly constructed over a decade. Continue reading


Is Kerry the Worst Secretary of State Ever?

John KerryThough the accomplishments of Kerry’s predecessor, Hillary Clinton, in her four years at the State Department were slim, right now she is starting to look like a foreign-policy giant by comparison. 

by Jonathan S. Tobin

During his first term in office, President Obama was criticized by conservatives for conducting what they dubbed apology tours in which he always seemed to find something in American history for which he felt compelled to make amends. To his surprise, neither apologies nor the magic of his personality and historic status were able to conceal the fact that he was far better at alienating America’s traditional allies than winning new friends. But as awkward as the president proved to be at diplomacy, even that experience did not prepare the world for John Kerry. In less than a year, he has not only already repeated these mistakes but also exceeded them. Currently on yet another apology tour of his own in the Middle East, where he is desperately trying to reassure moderate Arab countries that he has not sold them down the river in his vain quest for a nuclear deal with Iran, American prestige and trust in Washington’s word are at a low point in recent history. Continue reading


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