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Biden steps up drive for alternative supply chains to cut dragon to size

US President Joe Biden

US President Joe Biden is moving ahead with a hard line policy on China, dashing the hopes of the dragon to revert back to a business as usual relationship with the new administration in Washington.

According to the Nikkei Asia magazine, Biden is set to sign an executive order this month to accelerate efforts to build supply chains for chips, electric-vehicle batteries, rare-earth metals and medical products to reduce dependence on China. The report states that the US is looking at a partnership with countries like Taiwan, Japan, South Korea and Australia to pursue this policy.

Nikkei Asia cited a draft document of the Biden administration on the subject which envisions the development of a national supply chain strategy, and is expected to call for recommendations for supply networks that are less vulnerable to disruptions such as disasters and sanctions by unfriendly countries.

The U.S. imports about 80% of its rare earth metals, used as inputs in electronic products and defence hardware such as fighter jets and missiles, from China, and relies on the country for as much as 90% of some medical products.

The order states that "working with allies can lead to strong, resilient supply chains," suggesting that international relationships will be central to this plan. Washington is expected to pursue partnerships with Taiwan, Japan and South Korea in chip production and Asia-Pacific economies including Australia in rare earth metals.

The U.S. plans to share information with allies on supply networks for important products and will look to leverage complementary production.

India’s role as Quad partner

Experts are of the view that democratic India, too, has a role to play as an alternative base to China as countries like Taiwan’s Foxconn have already set up a factory at Chennai. Similarly US tech giant Apple is also planning to set up manufacturing facilities in India after deciding to scale down its presence in uncertain China. Now with the clear indication that the Biden administration is continuing with the policy of decoupling from communist China the process is expected to accelerate.

Indianarrative.com had reported recently that anticipating Chinese pressure tactics, the Indo-Pacific Quad, comprising India, Japan, Australia and the United States is now working together to break China’s monopoly on rare earth metals.

Within the Indo-Pacific Quad, Australia is the fulcrum that can liberate the region’s democracies and like-minded countries from arm twisting by China, which can leverage its rare earths’ monopoly to exercise political control.

Interestingly, India also has monazite beach sand in many coastal states which contains rare earth metals. Currently government-owned Indian Rare Earths Limited (IREL) is the only company which mines the sand to  produce rare earth oxides which are low-cost, low-reward upstream processes. These are sold to foreign firms that extract the metals and manufacture high value products elsewhere. The focus of IREL is on extracting thorium from monazite to supply the Department of Atomic Energy for running nuclear power plants.

Experts are of the view that this could change now with the focus on breaking China’s monopoly on the supply of rare earth metals potentially opening up a new opportunity.