The United States government became the second-largest shareholder in an Australian mining company last week. If there’s a compelling case to gamble taxpayer money like this, the Trump administration hasn’t made it.
The U.S. International Development Finance Corporation announced plans Wednesday to convert a $31 million loan to Syrah Resources, which operates a graphite mine in Mozambique, into a 20 percent equity stake. The move is an attempt to counter China’s control of the world’s supply of graphite, which is essential for rechargeable batteries that power electric vehicles and energy storage systems for the U.S. grid.
“In today’s era of global competition, economic security is national security,” said Ben Black, the head of the federal agency. In other words, the administration is seeking to compete with China on critical minerals by imitating Beijing’s state-controlled management of resources. What could go wrong?
The administration has already used taxpayer dollars to buy equity stakes in other critical mineral companies, such as Trilogy Metals, Lithium Americas, MP Materials, Vulcan Elements, Korea Zinc and USA Rare Earth. It’s also entered into an agreement to take a 10 percent stake in Intel, the chip manufacturer, and secured a “golden share” of U.S. Steel while negotiating the acquisition of that company by Japan’s Nippon.
There may be a case for limited government intervention to guarantee the supply of certain inputs into products crucial for national security. But a better way to ensure that happens is reducing trade barriers with allies rather than allowing bureaucrats to bet on which firms might be successful.
These deals are especially problematic when the companies have business connections with administration officials or close allies of the president. Syrah, for example, is closely tied with Elon Musk’s Tesla. But they also distort the economy by boosting projects that might not make sense economically. And taxpayers will be left holding the bag if the company fails.
China’s control of critical minerals is a serious issue, but having Uncle Sam as a minority shareholder in a foreign mining operation won’t solve it. Getting out of the way of innovators, and allowing private money to flow more freely between friendly nations, would do more.
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