U.S. eyes updated pact on critical minerals amid calls for Canadian cut off
Canada would likely need to see an "evolution" in the United States' approach to critical minerals before returning to discussions to renew an agreement for the development of the vital natural resource, says a trade analyst, but there are limits as to how much leverage Canada can wield with those minerals in broader trade talks with the Americans.
The U.S. has been seeking to solidify its critical mineral stockpile amid its concern over China’s control over the increasingly important natural resource, including for the American military.
Trade consultant Eric Miller, president of the Rideau Potomac Strategy Group, said that the U.S. sees co-operation with Canada on critical minerals as a long-term project and not something that brings immediate leverage.
Miller, a former adviser in Canada’s Embassy in Washington, D.C., said that—unlike Canada—China’s large stockpile of critical minerals gives it leverage to control the market through dumping or restricting the global supply.
“Canada has the raw materials, but it doesn’t have sufficient refining capacity to refine those materials,” he said. “A mineral that’s locked up in a deposit somewhere in the North may as well be on the moon because if it’s not in production and there is no infrastructure to reasonably get into production, then it’s not helping the conversation.”
A U.S. Embassy official noted during an Aug. 28 briefing that there is an “opportunity” for the renewal of the bilateral Canada-U.S. Joint Action Plan on critical minerals collaboration.
The U.S. Embassy in Ottawa hosted a background briefing on the benefits of greater Canada-U.S. co-operation on the development of critical minerals following the collapse of trade negotiations between the two countries on Aug. 22. The briefing was planned before the talks were suspended.
An embassy official didn’t directly answer whether critical minerals are being used by Canada as a leverage point in trade talks, citing the jurisdiction of the Office of the U.S. Trade Representative over the negotiations.
“There’s a lot of potential to expand that co-operation,” the official said, noting that the U.S. had discussed a renewal of the bilateral agreement in the early days of the current administration as “an area of opportunity in the relationship.”
But they remarked that other aspects have taken precedence, including the discussions on the Canada-U.S.-Mexico Agreement (CUSMA).
Since the breakdown of negotiations that preceded new tariffs levied by the U.S. and the planned retaliatory Canadian counter-tariffs that will come into effect on Sept. 8, Ontario Premier Doug Ford said that “everything is on the table,” including cutting off the U.S. from Canada’s critical minerals. Western premiers have objected to attaching a tariff to energy exports.
Prime Minister Mark Carney (Nepean, Ont.) has previously said that he wouldn’t leverage critical minerals or energy after remarking last December that continued American access isn’t “assured.”
Before trade talks broke down, it was reported that the U.S. was seeking right for first refusal on Canada’s critical minerals.
Former Liberal MP John McKay, who is a past co-chair of the now-paused Canada-U.S. Permanent Joint Board on Defence, said the U.S. is making a “sovereignty play” through its critical minerals demand.
“So all they're doing right now is asking semi-politely that they want effectively the right of first refusal or a veto over our resources. This is simply the opening volley of their not-so-subtle attempt to turn us into the 51st state,” he said.
Carney told reporters on Aug. 22 that Canada “would never give exclusive access” to its critical mineral resources.
McKay said that concern about China’s control over the critical minerals market shouldn’t drive Canada into the arms of the U.S.
“It doesn’t follow that you should exchange one form of sovereignty dominance for another,” he said, remarking that giving a right of refusal would be an action of a “vassal state.”
He said that there needs to be a recognition that the development of Canadian critical minerals should benefit Canada.
Miller described the current bilateral agreement as “not especially ambitious,” with a focus on co-operation on mapping and finding out where projects could be located.
He said that to return to the table there will have to be an “evolution” on the U.S. position around a right of first refusal.
“There would have to be an acceptance in the U.S. system that it doesn’t get a veto over Canada licensing a mining project to a company in Europe or Japan,” Miller said. “There will have to be a walking back of that idea of a veto before you get into a position where you can re-engage on this front.”
Miller said that the public support for Carney’s decision to walk away from trade talks will also limit his flexibility to restart them.
McKay said that the Trump administration has “spoiled the environment” for any ongoing negotiations.
“You have to fundamentally question whether there are any deals that can be cut in any shape,” he said.
The limits of leveraging Canada’s critical minerals
Vina Nadjibulla, CEO and co-founder of the Centre for Strategic Statecraft, said Canada has been hesitant to fully sign off on the U.S. approach to critical minerals while waiting to see how the discussions around the CUSMA renewal and bilateral trade unfolded.
“I don’t know to what extent we can use it as leverage especially when it comes to our ability to exercise any type of restrictions,” she said. “It’s an issue that could be a win-win. Both sides want to work on [the file] bilaterally and as a part of the G7. But I don’t know I’d put it as leverage, but [rather] another point on why this relationship matters and having a more integrated North American approach to critical minerals [or other sectors] actually is to the benefit of both countries.”
She questioned how a right to first refusal would work, noting that the U.S. hasn't included those terms in agreements with other countries.
Nadjibulla said any discussion on critical minerals should be held within a broad conversation about the economics and security of the Canada-U.S. relationship.
University of Ottawa law professor Wolfgang Alschner, an expert on international economic law and critical minerals, said any leverage Canada would have is reduced by the Americans' own diversification efforts to source what they need.
“It’s not as if the United States is just waiting to get access to Canada’s critical minerals,” he said.
He said that Canada is “slightly less exposed” to China’s control of the critical minerals market compared to the U.S. due to its need for supply.
Depending on China to process critical minerals is not in Canada’s interest in the long run, Alschner said, but noted that this country doesn’t have the same urgency to diversify as the U.S.
nmoss@hilltimes.com
The Hill Times