- Critical raw material clubs can help diversify critical minerals supply chains by improving cooperation, investment, and resilience among trusted partners.
- Different types of CRM clubs are designed to address distinct economic challenges, including information gaps, coordination failures, commitment issues, and distributional conflicts.
- Effective CRM clubs require governance arrangements that are proportionate to the complexity of the economic problems they are intended to solve.
Critical mineral supply chains are globally concentrated. China’s dominant position in the mining, processing, refining, and manufacturing stages of several critical raw material value chains has long been recognised, and by many, feared.
In the West, China’s demonstrated willingness to use its dominant position through export controls and other trade measures has intensified concerns about economic security, supply chain resilience, and strategic dependence.
Against this backdrop, policymakers have increasingly turned their attention to critical raw material (CRM) ‘clubs’: formal arrangements among groups of countries organised around access, production, processing, trade, and other aspects of critical commodities and associated value chains. This can be seen in the European Union (EU) Minerals Security Partnership, the Group of 7 (G7) critical minerals initiatives, the US-Japan critical minerals agreement, and various free trade agreements (FTAs).
Whether described as mineral security partnerships, friend-shoring arrangements, strategic supply chain alliances, or mineral security unions, the underlying idea is broadly similar: a heterogeneous group of countries – producers, refiners, processors, manufacturers, and consumers alike – commits to cooperate closely in order to reduce vulnerabilities associated with highly concentrated supply chains.
Why clubs?
The objectives behind CRM clubs are generally well understood. Governments seek to diversify sources of supply, encourage investment in mining and processing capacity, facilitate domestic and foreign direct investment, and reduce dependence on geopolitical rivals. They improve transparency across value chains, coordinate responses to disruptions, and strengthen long-term resilience.
In some cases, the ambition extends further to fostering entirely new CRM value chains among trusted partners. Possible metrics of success include reduced concentration by value chain stage, bankable non-dominant capacity, stockpile coverage, time to replace disrupted supply, or crisis-allocation reliability.
Most of the discussion to date has focused on why such clubs are needed. Comparatively little attention has been devoted to a more difficult and arguably more relevant question: what should these clubs actually look like?
The challenges faced by CRM clubs
This question of institutional design matters because different types of ‘clubs’ solve different problems. CRM clubs should therefore be understood as institutional responses to a set of economic and strategic challenges that arise when countries attempt to diversify supply, reduce dependencies, and build more resilient critical mineral value chains.
Consider the following – non-exhaustive – list of economic and strategic challenges that CRM clubs must solve. These challenges reflect different underlying economic problems such as information failures, coordination failures, commitment problems, and distributional and collective action problems:
- A central challenge concerns the relationship between producer and consumer countries. Consumer countries seek reliable access to critical minerals at predictable prices and with minimal risk of disruptions. Producer countries, on their end, tend to seek investment, technology transfer, local value creation, and participation in higher-value stages of the supply chain. While both may support diversification and resilience in principle, disagreements over how costs, risks, and benefits should be distributed are pre-programmed.
- These tensions are compounded by the economics of CRM value chains. New mines, processing facilities, refineries, transportation infrastructure, and downstream manufacturing plants require substantial capital expenditures and long investment horizons. These investments are frequently interdependent. Mining projects may not proceed without processing capacity; processing facilities may not be viable without guaranteed feedstock; manufacturers may hesitate to commit without confidence in future supply. This vicious circle can result in underinvestment, even though all participants agree that diversification is desirable.
- Even where investment opportunities exist, participants face questions of credibility and commitment. Investors considering large, sunk investments are facing subsidised and sometimes state-driven price volatility that can push prices below breakeven. To make their efforts commercially viable, investors must thus rely on certain concessions from host governments and customers alike. Private investors and firms must have confidence that contractual, regulatory, and market-access conditions – for example, in the form of price guarantees, minimum quantities, or pooled offtake – will be honoured.
However, investors must consider the possibility that governments alter policies after investments have been made. Host governments may promise cooperation during normal times but impose restrictions during shortages. Long-term supply arrangements may prove difficult to sustain when domestic political pressures intensify. Such risks can discourage investment and weaken efforts to establish alternative value chains.
- Resilience initiatives face distributional challenges. Strategic stockpiles, spare capacity, emergency procurement arrangements, and crisis-response mechanisms all require resources in exchange for protection against future disruptions. Countries may disagree over who should bear these costs. Similar questions arise during shortages: which members should receive priority access to scarce supplies, and according to what rules?
- Cutting across these challenges are additional information problems. Governments and firms along the CRM value chain frequently operate with incomplete information regarding future demand, project pipelines, processing capacity, stockpile levels, and emerging vulnerabilities. Individually rational decisions may therefore fail to produce collectively resilient outcomes.
A problem-based approach to institutional design
Looking at the information, coordination, commitment, and distributional problems that CRM clubs face, it is evident that not all of these challenges need to be addressed with the same degree of cooperation.
Nor do all challenges justify the same institutional commitments. Figure 1 develops a taxonomy of CRM clubs that links categories of economic failure to alternative institutional designs, policy instruments, and governance arrangements.
The central institutional-design question is therefore not how to create the deepest possible CRM club, but how to match the degree and type of cooperation to the economic problem being addressed.
Figure 1: Matching CRM club designs to economic problems: Functions, policy tools, and governance requirements
| CRM club type | Typical tools | Economic problems addressed | Governance requirements |
| Transparency clubs | Geological surveys; market intelligence; supply chain mapping; early-warning systems; data-sharing platforms; regulatory dialogues | Information problems: Information asymmetries; poor visibility into supply chains; uncertainty regarding demand, supply, bottlenecks, and vulnerabilities | Data collection; reporting obligations; information-sharing protocols; secretariat functions |
| Coordination clubs | Investment facilitation; project pipelines; infrastructure planning; standards harmonisation; regulatory cooperation; preferential tariffs; customs cooperation; mutual recognition agreements; rules-of-origin frameworks; joint investment vehicles; subsidies discipline | Coordination problems: Underinvestment; resource nationalism and market fragmentation; coordination failures (for instance, infrastructural bottlenecks); missing complementary investments; fragmented value chains; trade and regulatory frictions | Monitoring; project oversight; financing coordination; priority-setting; regulatory coordination mechanisms |
| Assurance clubs | Strategic stockpiles; investment and supply commitments; long-term contracting; export-restriction disciplines; no-interruption commitments; quota exemptions; priority-access arrangements; voluntary crisis consultation procedures | Commitment problems: Hold-up and dynamic bargaining problems; policy uncertainty; export restrictions; supply insecurity; credibility and commitment problems | Verification; compliance monitoring; dispute settlement; enforcement mechanisms; crisis-management procedures |
| Strategic integration clubs | Joint procurement; collective stockpiles and shared reserves; common financing facilities; integrated value-chain planning; allocation mechanisms during shortages; coordinated export controls; common border measures and adjustments; common external tariffs; joint purchasing arrangements; emergency coordination and rules; crisis management mechanisms; collective response procedures | Distributional problems: Burden-sharing problems; crisis allocation; insurance failures; distributional conflicts; collective-action problems; free-riding; moral hazard | Joint decision-making; cost-allocation formulas; contribution requirements; conditional access rules; minimum preparedness obligations; delegated authority; voting rules; permanent institutions; governance of common assets |
The typology offered in Figure 1 highlights three broad implications.
First, different CRM clubs are not simply different levels of integration. They are responses to different categories of economic failure. Transparency clubs primarily address information problems. Coordination clubs address coordination failures, including underinvestment and missing complementary investments. Assurance clubs address commitment problems. Strategic integration clubs address collective-action and distributional problems.
The appropriate institutional design therefore depends less on the desire for cooperation itself than on the specific economic challenges members are seeking to tackle and overcome. And challenges may well differ by the countries involved, the mineral or product at issue, and/ or the value chain stage in need of support.
Second, the four club types correspond to progressively more demanding categories of economic failure that become increasingly consequential as value chains become more integrated and interdependent.
Information failures inhibit effective decision-making. Coordination failures risk impeding investment and value-chain development. Commitment problems may undermine confidence in future behaviour. And distributional and collective-action problems complicate crisis management and burden-sharing. These challenges are often compounding, meaning that more ambitious forms of cooperation must generally address a broader set of economic challenges than simpler arrangements.
Third, Figure 1 highlights the institutional consequences of this progression. As countries seek to address increasingly complex economic problems, they must accept increasingly demanding governance arrangements – a catch-all term that includes legal, sovereignty, political, and administrative costs. Monitoring may require verification, verification may require enforcement, and enforcement may ultimately require joint decision-making.
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In short, the more demanding the economic problem, the more demanding the governance arrangements required to address it. When it comes to CRM clubs, there is no one-size-fits-all institutional design.
The practical debate over CRM clubs should be less about whether countries should cooperate, and more about which economic problems they are meant to solve and the institutional commitments their members are prepared to sustain in order to solve them.
