Raw materials partnership: EU opens the door for negotiations with the USA

There is movement in the planned agreement between the EU and the USA on critical minerals for electric car batteries. The EU Commission has now adopted its negotiating directives for the agreement, largely clearing the field for the start of negotiations with the USA. UPDATE

After the Commission, the European Council must now adopt the negotiating directives, which would then authorise the Commission to negotiate an agreement containing provisions on a number of issues – including trade facilitation so that critical raw materials extracted or processed in the EU can be used in electric vehicles eligible for US tax breaks under the Inflation Reduction Act (IRA).

The background to the current search for a solution is a dispute over US subsidies for green technologies introduced at the turn of the year by the US government’s Inflation Reduction Act. The EU quickly criticised that the law would lead to a migration of green technology companies to the USA and countered with its own subsidy relaxations. Efforts to reach an agreement with the USA began in the spring.

Here is the chronicle: In mid-March, US President Joe Biden and EU Commission President Ursula von der Leyen first announced their intention to negotiate an agreement on critical minerals for the batteries of electric cars. Shortly afterwards, the US government presented a concept paper for this. In May, it was reported that negotiations between the US and the EU on the planned raw materials partnership were taking longer than expected and could drag on into the summer.

As the US daily Politico reported, citing people in the know, there was disagreement at the time over the formal shape of the agreement. While the US is said to insist on a binding pact, the EU is pushing for a more flexible agreement that does not require the time-consuming approval of its 27 member states, the report said. In May, the EU is even said to have discussed in private whether the agreement is still worthwhile at all.

In the communication now officially issued by the EU Commission on the negotiating directives drawn up within the EU, it now sounds like this: “Concluding an EU-US CMA will ensure that as an ally, the EU is granted a status equivalent to US free trade agreement partners pursuant to the US Inflation Reduction Act. EU firms will then be able to compete on a level playing field with US and third country competitors on the US market, such as Chile, the Republic of Korea, and Japan.” So there is concrete talk of an equivalent to a free trade agreement that is “on a par” with it.

Update 23 October 2023

At the recent EU-US summit, no agreement could yet be reached on the desired agreement on critical minerals for the batteries of electric cars. According to both sides, “progress” has been made, however, negotiations are to continue in the coming weeks.

The joint statement released by both parties reads: “We have made progress towards a targeted agreement on critical minerals to expand access to sustainable, secure and diversified supply chains for high standard critical minerals and batteries, and to allow minerals mined or processed in the European Union to count towards the requirements of Section 30D of the Inflation Reduction Act’s Clean Vehicle Tax Credit. We look forward to making further progress and consulting with our respective stakeholders on these negotiations in the coming weeks.”

ec.europa.eu, ec.europa.eu, whitehouse.gov (both  update)