U.S., allies cannot allow China to dominate raw materials, technologies - Yellen

SEOUL, July 18 (Reuters) - U.S. Treasury Secretary Janet Yellen will call on Tuesday for deeper trade ties among allies to fortify their supply chains, combat inflation and thwart China's "unfair trade practices" and efforts to dominate key raw materials and technologies markets.

Yellen will make the comments in a major policy speech in Seoul after touring the facilities of South Korean tech heavyweight LG Corp (003550.KS) during the final leg of her 11-day visit to the Indo-Pacific region.

"We cannot allow countries like China to use their market position in key raw materials, technologies or products to disrupt our economy and exercise unwanted geopolitical leverage," Yellen will say, according to excerpts released by the Treasury Department.

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Instead, Yellen will say, the United States and allies like South Korea should focus on "friend-shoring", or diversifying their supply chains to rely more on trusted trading partners, strengthening economic resilience and lowering risks.

According to the excerpts of her comments, Yellen will say doing so would sustain the dynamism and productivity growth that comes with economic integration, while helping to insulate citizens in the United States and South Korea from price increases caused by geopolitical risks.

Western powers have raced to end their over-dependence on China as a key supplier since the start of the COVID-19 pandemic, which exposed the fragility of global supply chains and laid bare gaps in domestic capacities in key sectors.

Yellen will say the pandemic and Russia's war in Ukraine - actions Moscow calls "a special military operation" - made clear the necessity of addressing supply chain vulnerabilities and working to reduce logjams and shortages that have driven prices higher around the world.

Friend-shoring offered the United States and its allies a way to preserve the best features of the rules-based global order, while addressing unfair Chinese trade practices and ensuring access to vital inputs and products - from medicine to semiconductors and electric vehicle batteries, she will say.

In her comments Yellen was set to highlight a series of investments that LG has recently made to expand the manufacturing of electric vehicle batteries in the United States.

She will say the key to the new approach on trade required countries to properly account for and factor in the costs of overly concentrated supply chains , geopolitical concerns and value - rather than "overly focusing on costs".

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Reporting by Andrea Shalal; Editing by Kenneth Maxwell

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