 Yeah, it's more than just cobalt in the Congo. It's everything in the Congo, and it's more than cobalt in the Congo. Carl Baker joins us. A senior advisor, I think at the Pacific Forum. Long time. Okay, sorry about that. And we're going to talk about cobalt in the Congo because it opens, it's like, it's like, it's like Proust, you know, you open the subject through the keyhole, and you look through and you see on the other side so many issues, so many concerns right Carl. Yeah, and yet you don't even know what concerns you're looking for. Is it a concern. That that I think that's the first question is how do we know it's a concern, what are we measured what's our measurement. Is it because there's China and resources involved in the sentence. Is that is that why it's a concern. Well, let's let's go to the New York Times in the Washington Post who say, you know, we're in, we're in a kind of kimchi lately because without realizing it. We lost control of a big American mind, a mind that produced two thirds of the world's supply of cobalt. And a year or two ago, I think it was a year or two ago, the Chinese bought it. And we didn't do anything to stop them not withstanding whistleblowers with the State Department, you know, in Africa and also the manager of the mind warned, you know, the American government not to let the Chinese conclude the deal but we didn't do anything despite that advice and they bought it and they own it. And they are actually developing it and it is a huge project in the Congo. And the name of the mind or at least the first name. And, and what's I think really catchy about this is that, at the same time, as the Chinese are developing this mind and controlling two thirds of the world's supply of cobalt, which is necessary for batteries. By the way, the Chinese also have lithium now to out of the Congo I think maybe out of the same mind. The Chinese are all the rage. And the same time is, you know, I think it's Ford Motor Company is putting in a trillion dollars for, you know, electric vehicles and the Biden administration is putting in, I don't know many tens of millions to develop, you know, the infrastructure for charging stations all over the country. And also providing incentives, you know, tax incentives and the like to encourage the American people to buy electric vehicles, all for the purpose of climate change, dealing with climate change. And at this very point in time we find that maybe we can't do that, because we don't have the cobalt to build the batteries to build the cars. Is this a, is this a no concern Carl. It depends. I mean, that's the easy answer it depends. If we had a good measure to determine what what is important and what isn't it would be much easier. In other words, if we had an economic policy that defined what strategic goods we really are concerned about, then we then I have an easy answer for you I would say yep it's on that list. And this is what we need to do because it's on that list so we need to do something. And that's what the problem is is this this New York Times article is like responding to your inbox. You know, it's, is there a policy, then it's very easy to answer the inbox if there's not, then everybody's scrambling around saying what should we do should we should we should we ban all all aid to the Congo so that they come back, or should we you know should we try to restrict imports from China cobalt from China. I mean it's not a problem if we can import cobalt from China, because that's, that's who's going to that's who's going to own it, because they do. They had two minds and just a little further clarification. There were two minds involved in the Congo the first one was bought at the end, right at the end of the Obama administration, and the second one was bought right at the end of the Trump administration. Right. I mean, I think that's a coincidence, but it also is reflective of part of the problem the United States has is that we haven't been consistent in the administrations. So, the Obama administration didn't see it as a problem and the Trump administration didn't see a problem for different reasons I think. But nonetheless, you know, the different administrations are so interested in doing whatever the other one didn't do that we end up not having a good policy, and not a clear guideline on how to react when we see things like this that are getting that's getting reported in the New York Times as something terrible, because, because of the fact you mentioned which you know are sort of summarized in the article. I mean, China. I mean, if you want to, if you want some more numbers, China purchased 44% of electric vehicles and I think 2019. So, that's a significant number. So they're interested in developing the electronic vehicle and the electronic vehicle battery market. And, yeah, cobalt is is an essential element as as is lithium graphite and several other, what some people have referred to as conflict minerals. You know, and that's, and that's sort of the rest of the story about those minds and McMoran's involvement in those minds is, you know, a couple of years ago, there was a lot of concern about what was called artisanal cobalt mining in those cobalt as as you know is a chemical, and it's actually derived largely from copper and nickel. And so what you have to do is you have to you have to basically chemically compose cobalt. And so what what happened is nobody really saw much value in the stuff and so local local people were doing dangerous things. They were basically stealing stuff out of the out of the minds, and selling cobalt along the side of the road if you remember in the picture in the New York Times showed so these little booths selling cobalt along the side of the road. You know, so, so, I mean, it was a business decision that was made by by the company and they decided it wasn't it wasn't worth it and so they sold the thing for what seems like dirt cheap now that we suddenly recognize that in cobalt is a key element to the emerging economy, the post fossil fuel economy if you will. I keep thinking of the Flemish, the Dutch master painters who used co invented cobalt blue. Maybe they didn't invent it. And it came from cobalt I mean that's. They were Akamai about cobalt a long time. They had no idea but it's a nice blue I really. It was a nice color. It's funny the Times said that in the Obama administration, Obama was consumed I quote consumed with things going on the Middle East said in the Trump administration he was consumed with avoiding the remediation of climate change problems and he didn't want to touch anything, but anything to do with climate change and batteries, you know, are in that category. That's right. So he didn't want to do anything. And you know, and the other thing is, and you pointed this out to me is that when you have a democracy, where the power ostensibly changes every four years and the administration each guy wants to do something different than the last guy wanted to do, as you said, then you have changing policies and those policies filter all through the government. And so you can have a viable policy on given subject in one four year term and then next four year term goes away. And if, if Biden was sitting with Xi Jinping and he did a few days ago, Xi Jinping would say, you know, your democracy doesn't work. You guys can't stay on the same policy for more than four years, you're always changing policy and you can do long term I was always impressed with how the Chinese looked ahead. And for decades and generations, even centuries to try to fashion policies that would be sustainable over multiple lifetimes. And in this case, it's easy. If you make your mind up that you want to do electric vehicles or renewable energy in general because batteries apply to all renewable energy sources to, you know, contain, you know, to hold the charge so to speak. And, you know, a long term policy is really necessary and so this goes beyond just developing a policy for clean energy, which we have not really done. It goes to the question of finding a policy that will stay with us for more than four years. And that's a broader economic policy. I, you know, I found a quote from when job when job out in the in the 2010 state report. And he said, we need to fully bring into play the superiority of the socialist system, which is efficient decision making powerful organization and concentration of resources to achieve big things. In 2010. And, and that's what China I think is trying to do with buying copper mines in the Congo. You know, it's an example of implementing that kind of policy it's a long term policy. And, and it's a system that they believe is efficient in doing those kinds of big things. And it is it's a huge, it's a huge undertaking. And, and I mean the numbers the numbers are sort of staggering at the amount of cobalt that they intend to mine out of those, out of those mines in the Congo. Now having said that, there are long ways from doing that. I mean, you know the rest of the article pointed out that there's there's people who are not very happy in the Congo about the promises for the infrastructure development that China has sort of done but sort of completed. And they're, they're concerned about some of the safety issues, which of course, the American company was always on the hot seat for that they were trying to maintain standards of mining that are almost impossible to maintain in places like that. So, you know, so, so, yeah, it's important but you know, getting getting through the keyhole here. I think what's what's interesting about the article is it's a little bit of fear mongering by the by the journalists about about the the strength of the Chinese system and the uniqueness of American policy responses, and justifiably so, but it points out, you know this whole notion now that we are moving into a Cold War with China. And it points out a very important fact about this this emerging Cold War if you like that if you like the term or not, doesn't really matter. The fact is is that we are now in a stage of competition with China. And people reckon back to the days of competition with Russia, or the US SR, more accurately in the old Cold War, the difference here is that there's an economic component that's very real, and, and very important to understand the implications of that economic component. You know when we had the when we had the Cold War with with the US SR we didn't really worry about that, because we had a single policy. It was the, it was the US is Cold War policy and there wasn't much difference between the Republicans and the Democrats. There wasn't, there wasn't a sort of drifting at the end of the administration's to allow things like sale of a critical element in a mine in in the middle of Africa. I think those kind of things just wouldn't happen because we would never let down our guard from from basically blocking all economic activity, any technology transfers into the US SR, where with China. It's easy to do because it's a business decision by McMoron because they couldn't afford to maintain the mine, because they had stupidly invested in fossil fuels, and had to had to get rid of the debt. And China saw it as an opportunity took it, and in the, in the belief and free markets, the United States saw that as a as a legitimate business deal without without thinking through the strategic ramifications of it. And so, you know what you have is you have this this hugely integrated global economy. And so that's why this cold if this is going to be a Cold War, we really need to think hard about how we develop an economic policy in response to it. Because you can't simply say we're going to cut off China, you can't isolate the Chinese economy. We've we've learned everything is so integrated. It's like every every time you turn around. You see another case where where the supply chain is is all over the place. And China is quite often right in the middle of that supply chain for the United States. You know it's with semiconductors it's with it's with rare earths. It's with with all these different kinds of things that are essential to the new economy. You know, and so, yeah, Obama was was fixated with the Middle East, because that's the old fossil fuel days when that was the resource that everybody needed and wanted and knew was important to the industrial economies of the West. So, now we're moving into this new economy, and we're moving into this new sense of competition, but the competition is so much different this time around because the Chinese have focused on the economic component, and they've they've put that that economic integration is going to make it almost impossible for anybody to shut them off. And, and the size of their economy is is so great that everybody is going to be fixated on. Remember the old saying sell one coke a day to everybody in China, and you're going to have a successful business, or better, or better. Well, yeah okay but they certainly have it's clear to everyone that they have made a plan. They have focused on rare earths they've focused on chips. And, you know, given a few moves, they will, I'm sorry to say that they will have control, if you will, and I don't say monopoly but at least some significant global control of these critical, these critical things, and we won't. I mean throw a proposition at you, and see if you agree or not. They're winning. They're winning the competition, because they can formulate policy to get hold of these things, and then sell them to us, and the rest of the world. And we're not doing that. I agree. Wow. And, and what do you do about. I mean what's what's the solution to it is is. First of all, I think, I mean there's, there's a couple things I mean let's begin by by understanding the Chinese economy. I don't think we still agree on what the Chinese economy is. You know there's there's a lot of different ideas, some people still believe that there's, there's a potential for reform that China is going to join the liberal economic order and they're going to suddenly comply with with the WTO. And there's others who say no they're not. And, and it's impossible. You know and then there's and then there's variations in between so what do we call China is China is China capitalist. I mean, in some ways, in some ways it's, it's, it's the quote from Lin from Wenzhou is quite similar to what Lenin said back in the 1920s, when he was trying to develop the economy in the Soviet Union. You know, so what is the economy is it is it a state capitalism. There's there's sort of a consensus that that's what it's starting to look like, but then there's there's, there's still these these big corporations that are not really not really owned, but there's crony capitalism. There's another that's another word that people have used a negative side of China. There's another, another scholar who's talks about the party state capitalism. You know, and that the party is now steering the economy and it makes the decisions of what are the key, what are the key aspects of the economy, and it's the one that shuts down company like Alibaba who's trying to trying to go go into the markets. So, you know I think we first we need to decide what what we really are looking at in China. It's a moving target isn't it coming right now the Alibaba is a good example and and and don't forget the tennis player that disappeared any celebrity, anybody who could have a following anybody who competes for public attention in China is at risk because something is happening with Xi Jinping. I agree that that, but it's more about it's more about the consolidation of power power around the party, and certainly Xi Jinping is is is dominant because he's the head of the party. It's not so much his state capacity anymore I think people realize that he's very much becoming the chairman, rather than the president. You know and you're starting to see that that shift a little bit that there's a recognition that that he really is the chairman, and is interested in promoting the party as as the key guide guidance for for the state, which makes sense and so you know, that's why some people think that it's now the party state capitalism, but it's capitalism to serve the interests of the party. And for most this next I asked you this the last time we were together. Is it necessary. Was it necessary to, you know, put the stranglehold on Hong Kong, is it necessary to rattle chains around Taiwan and makes viable threats against Taiwan take it over. Let's leave Taiwan alone I mean that's that's become sort of a hot button. You know if you saw today in the news Henry Kissinger said well it won't happen for 10 years anyway. You know, so you know that, but but Hong Kong. Yeah I think they felt that it was time to move on Hong Kong after, you know after two years of protests. I think it was clear to them that the two party, or the two state, one, what is it one one one state two systems wasn't working. You know so I think, I think in the mind of the of the party and in the mind of she if you will. And they did see that it was time to to move on on Hong Kong and that's why they did it through the security law, because it is the most rational way that they saw the only way to quell the democracy demonstrations was to to use force. And so. Yeah, they teach us about China's increased efforts at global economic competition. I don't I don't know that I don't know if I understand the connection. I mean, it's aggressiveness. It's very aggressive stuff. And I suggest that their economic policies are also aggressive. Hong Kong is consolidating inside China. The economic policies are more focused on on externalizing some of the some of the over capacity and excesses inside the system. And that's, and that's what I think is really part of the motivation of trying to try to be aggressive with their economic policy is that they need to they need to move some of that over capacity outside of China and create certain personalities that allow them to better gain control internally. I mean if you want the primary motivation, of course, is maintenance of the party dominance in the system, because that's again I think that's where they see the strength of China is internal coherence. And that's how you maintain an internal internal coherence is you don't allow the me to movement to gain any traction. You don't you don't allow any any protest, or any any descent of the decisions made. And in some respects, you go back to my analogy from from the old Cold War, you know, and that that was true in the United States you didn't have you didn't really have any descent. You know, now you have a policy in both parties, really, although I don't want to make it sound like it's, it's equivalent because I don't think it is I think one side is worse than the other, but both sides to some extent. See the other side as the enemy. And, you know, and that cannot be helpful when you're trying to compete with someone like China that absolutely dismisses all descent as as violating the state principles of cohesion. Well it's interesting you, you paint a picture of China as not permitting any divisiveness. It's true I mean everything you hear about China is consistent with that. At the same time, this country has divisiveness in every quarter in every possible way it can possibly have divisiveness and my understanding is the same thing is happening in Europe. But it's not happening in so much. Well, Russia is able to quell it, and China is able to stamp it out. So, what does this tell us to say that a country has the ability to make a plan, implement the plan on a global basis, get control of things that will enable it to better compete on a global basis, and quell all disturbances and descent. That is a good recipe isn't it. That is a good recipe and and as as when job I said, it's a it's a great opportunity to do big things. And so, you know, I think that sort of summarizes the vision that the Chinese leadership has. And, and now we need to decide, is that really deleterious to our best interests. And the knee jerk reaction, again the reaction to the inbox, when you see them taking control of the of the cobalt resources in the world the answer is yes. But is it we don't I mean I think I think we really need to learn what is going on in China, we need to understand how that economy works. If you want to if you want to attack the weaknesses if you want to be strategic about attacking the weaknesses of the system assuming you want to and I can understand why the United States and others might think that is useful, then you need to understand how it works. And I think so that that's my first point is is that you really need to understand how that economy works before you start deciding to to throw tariffs against you know which is is contradictory to everything that we've ever believed about collective action in the economic sphere. You know so so what what Trump did, you know with with tariffs, and the Biden administration hasn't changed it yet it may not be because it believes that tariffs was the right thing, but it's more inertia, than than it is commitment to the policy I think. But but the fact is is that that doesn't help us because clearly if you were going to act we're going to have to figure out how to act collectively with the rest of the world. Now I don't think I think we're too far past the idea of trying to go to the WTO and say, Okay, let's, let's sanction China. But I think what we do need to do is we need to look at the possibility of free trade agreements of creating, if, I mean, if, if not joining the old comprehensive. CTPP, CTP, I can't say CCCP, CCCP. Yeah, not the CCP, please, but the comprehensive and progressive. Transpacific partnership, that's what I'm trying to talk about. Okay, you know, or the old TPP, the Transpacific Partnership, and they've made it more complicated for people like me that stumble over long acronyms. Yeah, yeah, so, you know, but the point is, is that if, if we're not willing to join that, then, then at least we need to think about how we're going to act collectively with the rest of the world to stymie some of the aggressiveness that we see in China. But first we need to decide what is aggressive and what isn't. Because just because they're taking cobalt doesn't mean that that's necessarily bad unless we decide cobalt really is a scarce resource that they intend to hoard and prevent other people from using. Yeah, so you know, what about this so you alluded to the possibility that there, there could have been a plan at the time the Chinese were taking over the cobalt in the Congo but there wasn't. What would the plan be what was the element of that plan be to stop them. I mean, for example, so here's an American company that was into coal losing money and coal and have a valuable asset in the Congo and let it go because it needed to cash from the sale. How could the United States have stopped that or changed it or saved that with their, what would the plan the policy be. You know, we have a lot of rules that tell our companies, not to be acquired by foreign companies right. We don't have rules that limit our companies ability to sell their assets outside the United States. I think I got that right. And so there's a vacuum there. And we, maybe we could have filled that vacuum in some way, and made it somehow incentivize them, not to sell the Congo cobalt, or stop them in some way by by State Department organizations who knows why we didn't do any of that and so when they needed the money as a commercial matter, they took the money. What would we do if we had the benefit of hindsight on that. I've been thinking about that since, you know, since we talked yesterday about doing this. And I think what you don't do is what you what you're suggesting is that you act like China, and you underwrite you underwrite companies so that in effect they become state companies. Because that's, that's sort of what you're suggesting is, is you underwrite my brands, bad decisions, and, and basically underwrite them to maintain the property that they had in the Congo and I don't certainly that would be one option. That's one option but then but then you're, then you're playing China's game, then you're doing the same thing, and then it becomes a competition of wheels, and you really are in a zero sum game of global competition in a cold war and basically an economic cold war. And so I don't think I don't think you do that but I think what you do is you create some incentives for not, not just that company, but you create incentives for people to recognize the value of that property, because don't forget the, the, the, the, the second, the second What is it? No, it's not Tronte, Tronte, Tronte, Tronte, the Tronte property was sitting was sitting dormant. I mean they weren't doing anything with it, because because they didn't want to invest the money and and they had so much trouble with the other site that they sold that, you know, four years or that they got out of that because they didn't want to be part of that either. You know so so I think what you what you have to do is you have to create some incentives for them to to basically develop the, develop the technology or develop the site, so that they can they can they can mine that cold, but you don't don't think what you don't want to do is I don't think you want to be like China and take take the, the opposite approach, the same approach that China takes to underwriting these companies because I still think that that's where the potential weakness in the China model lies is is overextending that that state sponsorship. And I'm talking I'm thinking specifically about Evergrande or Kaisu you know some of these real estate companies that are freely overextended their debt. And that's a that's a weakness in that system because because crony capitalism is not notorious for for exactly that of overextending debt both at the local level in state on enterprises in enterprises that are beholden to the state. You know so I think that's that's where you where you think about how you how you counteract the system, you know, one thing that could have happened and it would not be state owned. It could have been enterprises or the China model but it would be actually the American capitalist model, where the state through one of its, you know agencies within the administration comes to Ford Motor Company, and says you know, these guys are thinking about selling their mind in Congo and you're going to need a product of that money, and it's going to cost you more trying to get control of two thirds of the world's cobalt. So, hey, why don't you guys you know use the conference room at the right and have a meeting and see if you can't cut a deal where Ford can, you know enter into a an output contract, some kind of supply arrangement, and prepay for the cobalt that the McMorrin firm already has. And in that way we're not a party, the United States is not a party. It's merely making a suggestion that it would be beneficial to both of you and the country. If you cut a deal to, you know, to support future production out of this mind. I'm not sure that Ford recognizes the importance of the mind. If you remember in the Times article, in fact, you know the spokesman from Ford said, Oh, this isn't really a problem. We can we can find other alternatives. You know, we're not, we're not wedded to this idea that cobalt is the only answer. So, you know, there goes that economic incentive because they aren't agreeing with you they see they see alternatives, you know, and, and that's again, you know, in hindsight. I think I can easily see where they would have said well that's fine we'll buy it from China will let China do the dirty work of mining that stuff. And, and yeah their standards aren't quite as good so a few, a few Africans die. That's okay. You know, we'll get cheap batteries. I mean I'd be, I'd be in a little bit crude there but you know, I mean I think that there's some thinking like that that does go on. And so while, while your, your idea sounds, sounds somewhat righteous. I can see where where it would fall through the cracks in the cynical world that some of you have to be cynical. To be cynical I want to raise one other point that we should discuss. Yeah, and that and that goes to the Belt and Road. It goes to the way China has entered into these, you know, resource markets in Africa and in Latin America. You know they've been aggressive, and they've been successful in cornering the markets and many, many resources and it's certainly certainly part of their long term plan. However, they're not well liked, and they, and they don't treat people all that well. And they, they sort of dump on the local population and many, many ways is that it's kind of a revisiting colonialism is economic colonialism is what they do. There's nobody telling them no so they go ahead and do it. No national international organizations going to stop them, at least not now. And I wonder Carl is what they are doing their style of, you know, cornering these resources in these continents these two continents anyway and probably others. Is it sustainable, or over time is the flaw in their system with their, their style of economic colonialism, going to be sustainable, or is it going to is the flaw going to undermine their effort. And I think that's, that's exactly the question that we need to respond to. And, and it's the, and it's the area that we need to take action in is, is to start figuring out how strategically we hurry that process up a little bit of dissatisfaction with the Chinese. And I think that's where that's where real strategy comes to play is, is how, how do we highlight the weaknesses of that system. You know, I mean if you if you want to, if you want to play, play the game, you've got to play it on your own terms with your own values and the values of those that are being affected by the deleterious aspects of the China policy. And they're and those people are out there, you're absolutely right, you know and you and you saw it with with some of the Chinese about the people who have felt the effects in the Congo. You know they're not happy with what the Chinese are doing. They're, and the same goes for other places where the Chinese have moved in, and done these infrastructure projects that are sort of half done in places or done without real benefit to the local populations. You know and so I think that that's, that's exactly where, where we have to look to start countering what's going on. You're not going to, you're not going to beat China head on, because because that's one of the reasons when Jalbao says they they they have a very very straightforward planning mechanism and a very centralized decision making mechanism, and, and they can do big things, but it's difficult to do big things well, especially when you over extend yourself. And so that's where that's where the weakness of the system lies and that's where you that's where you attack it to to counter it. And then it and then you and then you're right at what you said when we began the session that we're going to be we're going to win in the end, because because we're going to persevere and be more clever than they are because because we're innovative. This reminds me girl of a speaker that you had two or three times over at the Board of Governors meetings at Pacific Forum. And he talked to one year he talked about soft power. He was with the Kennedy School as I remember you must remember his name. Jonah. Yes, Joseph SNI junior, I remember it well. And one year we talked about soft power. And then a year or two later he started talking about something called smart power, and he wrote books and articles about this. And when I when I hear from, you know, your thoughts on this is that we have to be smarter. We have smart power to the nth degree, when we figure out how to be the good guy in such a way so that we, you know, we make a great counter to what the Chinese are doing and, and people will like us better I couldn't help but noticing that the manager of the mine of the was a tanky mine, a fellow named Katanga didn't want the Chinese to take it over. He was being a whistleblower to and he's African. The guy the guy was afraid of what would happen if they took it over and he was speaking out against it. And the reason is clear. He doesn't like the way they do business. And so we could have friends like Katanga all over the place, using this kind of smart power on steroids. Yeah, and that's where we need to get to. And that's why, you know, we, we can't, we can't be like China, because then then you're just choosing the biggest bully in the valley, and China's a big bully. I think we'll have to leave it there Carl. Great, great discussion about such a timely topic. It's, it's been in the newspapers and because the newspapers that reported it on the original news sources if you will did the investigation. We'll hear more about it in other media I'm sure going forward. Thank you for responding with me on this. I really appreciate it. I look forward to our next discussion about say the follow up. And there will be a follow up because this is a this is a long term, long term project that that we're undertaking in figuring out how to compete in an effective way with with a power like China, which, you know, from from the broad 20,000 foot level looks unstoppable at this point. Yeah, what a challenge. Yeah, excitement. Thank you Carl Baker Pacific Forum really appreciate you coming down. Thank you.