The Peter Zeihan Podcast Series - Australia Strikes a Greentech Deal with the US || Peter Zeihan

Episode Date: May 29, 2023

There's one massive hole we'll need to fill if the green movement will ever work in the US...mineral resources. Thankfully we just struck a deal with our Aussie allies, who happen to have many of the key minerals and resources we need. Full Newsletter: https://mailchi.mp/zeihan/australia-strikes-a-greentech-deal-with-the-us

Hey, Peter Zine here coming to you from Chile Phoenix, where it's a balmy 102 at 10 in the morning. I don't know how people do it. It's only May. Anyway, back on May 20th, 21st, you're going to see this a few days later. A big deal, the Americans struck a deal with the Australians that will allow the Australians to contribute their mineral resources to the American green tech industry in a way that will benefit from the incentives and the subsidies that are part of the, the Inflation Reduction Act. There's made a real hullabaloo of late about which countries can get access and which can't. And Australia is a tight ally. It's a part of the inner circle. And most importantly, it has a pre-existing free trade agreement with the United States. And so they are the source of roughly half of the world's lithium and they're a significant producer of rare earths and zinc and copper as well. So this definitely scratches a lot of itches. Not all of them.

They don't do malibdum. They don't do silver. They We don't do a huge amount of bauxite, although they have some. No chromium, so it's not like this is a one-stop shop for everything the United States needs, but it's a real big step in the right direction. Kind of two follow-on thoughts from here. Number one, while the Australians are great at producing the raw ore, they do very little value at themselves. And one of the things that the IRA is attempting to do

is to build up a parallel supply chain that's independent from China, for processing of these raw materials into metals and then on into intermediate products. Australia is a logical place for a lot of that. I mean, yes, labor costs are high relative to other places in the world, but since the minerals are right there and the energy is cheap, especially if you want to do stuff with solar and the freaking outback, there's a lot of upward potential. They just need the investment and a decision that they want to move up the value-added chain. And the IRA will probably help with that now. You'll have some American-Australian fusion projects that are located on both sides of the Pacific.

The second thing are the countries that may be able to join the Australians in kind of this inner circle. The United States has a handful of free trade agreements. Obviously, the most famous one is NAFTA, and obviously they already qualify for these incentives. But the U.S. also has trade deals with the Koreans and the Japanese. And in the world to come, these are countries that are involved in manufacturing. They're going to do more and more processing in the value add for things like battery chast. themselves. And so it still needs to be negotiated, but it's starting from a very strong

position, and we should expect those to join. Who's not going to join is the European Union. Getting a free trade deal with the European Union has always been something that on both sides of the Atlantic has been flirted with, but it's never really gone anywhere. A lot of the European countries, most notably the French, are highly protectionist, and the idea of exposing themselves to the American market at all is just not something they've been willing to consider. But more importantly, Europe is in demographic collapse, and they've simply run out of people who are under age 40, the folks who normally do the consumption. So the United States no longer has any sort of economic rationale for an economic partnership over the long term with Europe, because it would

just mean that Europe would be product dumping on the Americans. Similar situation for Korea and Japan, but there's a big strategic argument that these are allies that have to be kept close as part of maintaining a presence in the Asian theater. In the case of Europe, in many cases, it's a little bit more problem than it's worth. And while there are independent European powers like the Brits or maybe the Swedes or in the polls, that may be worth it. If it's all part of a network of the EU, then the cost is simply too high. So there's definitely an inner circle and an outer circle among the allies. And when it comes to green tech, only the inner circle can play. All right. That's it. Everyone take care.