Welcome back to Critical Supply, a newsletter on trade, economic security, and EU-US-China relations. I’m Eduardo Castellet Nogués, the author of this newsletter.
As August passes through, inboxes on both sides of the Atlantic are filled with automatic replies promising a September answer. As Europeans enjoy the Costa Brava and Capitol Hill creatures spread over the globe, they might take this time to relax, but also think — what should the two capitals tackle first when they get back? Plus, are China’s advances on deep UV lithography a threat to the West? Lastly, we break down the latest critical minerals E.O.
When policymakers get back to their offices in September, they will have around three months before the end of the year, and the flurry of activity that 2027 will bring: a new Congress, elections, more summits, crises, etc. There is thus a small window for meaningful action, which they must seize. Below, Critical Supply has prepared a to-do list for policymakers on both sides of the Atlantic:
The household savings market has never experienced the Single Market. Two years ago, Enrico Letta and Mario Draghi published reports calling for the European Union to increase its competitiveness and cut red tape. In both their reports, they called for integrating capital markets and savings into the Single Market, eliminating national barriers. The premise was simple: Europe does not lack the capital; it has as much as the United States, yet that capital cannot easily cross borders within the EU, slowing investment in technology and defense.
This recommendation reached its peak momentum two years ago — it can and should be materialized by the end of the year. Political consultations have taken place, and leaders on the Parliament, Council, and Commission are all behind it. The Irish Presidency of the Council, wrapping up this December, is a good opportunity to initiate and conclude trilogue negotiations speedily, as done in the AI Act three years ago.
Delivering this program within two years would send a strong signal to business and investors that Europe wants to get on the right track quickly, and motivate them to accelerate it. While some policymakers in Europe, especially in Germany, are skeptical of integrating investments and banks at the European level, these very institutions do so out of fear of new competitors. Instead of resisting it, they should seize this opportunity to lead Europe’s next phase of growth rather than simply protect existing market positions.
The Lobito Corridor is a success case for US economic security policy: Washington funded the refurbishing of a rail line connecting the copperbelt region of Zambia with mineral-rich regions in the DRC and the port of Lobito in Angola. The goal was to show these countries that Washington could invest in infrastructure just as much as Beijing’s Belt & Road initiative could. More than that, it ensured the US a reliable source of critical minerals.
If the US government has shown anything in the last two years, it’s a deep interest in critical minerals, infrastructure projects, and the developing world, with the DFC launching equity projects in the DRC. The Lobito Corridor is a natural next step — before 2026 ends, Washington should create a Special Economic Zone in the Lobito Corridor.
The SEZ, which would include the port, rail line, and specified mining areas, would create a de facto single jurisdiction where there are now three, creating an attractive asset for investors, as the project already has Washington’s backing. Just as importantly, the zone could be structured so that minerals extracted there qualify under the Defense Production Act (DPA), satisfying U.S. national security concerns. Vitally, and since the EU is also an investor in the project, it could be a model to export to both Atlantic markets under a single jurisdiction.
The SEZ could be modeled after the SEZ already under planning in Luzon, the Philippines, under the auspices of Pax Silica or even be attached to it as a new model of US-allied collaboration.
As of November, the American people will elect at least 11 new senators and 57 new House members, the largest new class in two centuries. These new lawmakers are a challenge to the collective memory of the institution, but a chance to improve transatlantic relations.
In World War Two and the Cold War, the allies worked well together largely because individuals like Dean Acheson, Jean Monnet, Sir Winston Churchill, Franklin Roosevelt, and others had longstanding friendships of trust across the Atlantic, best depicted in “The Wisemen” by Walter Isaacson and Evan Thomas. In times of duress, leaders need a trusted phone number they can have frank conversations with — but the current ones are either retiring or not fully immersed in new political movements. Events like the MSC or Davos have long seen the same faces, but as political leadership enters a new age, new leaders should be welcomed into such environments.
New members of Congress will have two months before their swearing-ins. Once they take office, as freshmen and junior senators, their opportunities to travel to Europe will be scarce. The European Parliament and U.S. Congress should organize a weekend retreat between young members of both chambers. The retreat should feature time to strategize and think of what the new transatlantic alliance should look like. This would be an opportunity to foster a budding relationship without the intensity of a summit and to exchange genuine insight.
US Minerals Stay in America: The President has given agencies the ability to restrict the export of waste and goods that contain “recoverable critical minerals.” Every year, tonnes of waste are thrown out, many containing components of lithium, graphite, and other minerals needed for the US national security apparatus. The idea is to create an ecosystem of “recyclers” that can repurpose these minerals and reintegrate them into the commercial supply chain. Experts say that most minerals rarely lose their attributes and quality after their first use, while some simply have to go through a second refinement process. The move, under the DPA, could be an opportunity to force the creation of new recyclers and refineries in the US, as the E.O. clearly seeks to break China’s dominance of the supply chain.
China Dives into Deep UV Lithography: This week, a Chinese state-backed firm announced they had begun mass producing DUV lithography machines, challenging ASML’s chokehold. The firm, Shanghai Aishengna Electronic Technology Group (yes, few had heard of it before this), will start supplying SMIC and CXMT later this year. While the firm has not published the statistics of its machines’ performance, some in the West feel reassured that its yield will not be as optimal as ASML’s, and thus, will only be used for older-generation chips. While this could be true, the thought fails to appreciate a reality about China; they can innovate too. For long, the West has operated under the assumption that China could not catch up to ASML’s tech prowess without stealing proprietary information, and while it may be true, underestimating one’s competitor as unable to innovate is not a good strategy. Tech leadership today does not promise tech leadership tomorrow.
Why the EU’s Big Covid-Recovery Fund Lost Steam — The Economist
How to Reindustrialize America — Foreign Affairs — Jake Sullivan
Iran, China, Canada? A Defense of President Trump’s Grand Strategy — NYT — Elbridge Colby & Ross Douthat
Voltcraft: Industrial Competition in the Age of AI — AEI — Ryan Fedasiuk & Satvik Pendyala
No posts
Comments
Nothing yet. Say the first thing.
Sign in to join the conversation.