US and Europe plan to “decouple rare earths” from China, G7 Group Buyers Club Goes Global to Buy Minerals
“The EU and the United States have taken an important step toward each other in the trade conflict over U.S. green technology subsidies.” German “Der Spiegel” weekly reported on the 12th that U.S. President Joe Biden and European Commission President Von der Leyen made a statement after meeting at the White House on Friday. The joint statement announced that the two sides hope to reach an agreement on car battery minerals “immediately”. Such a deal should allow electric cars made in Europe to qualify for tax credits in the United States. In return, the EU will join the US in “decoupling” China’s rare earths to reduce China’s dominant position in the supply chain.
Von der Leyen listened to what Biden said.
The background of the dispute is the “Inflation Reduction Act” introduced by the United States in August last year. It allows the government to provide subsidies and tax incentives worth nearly $370 billion. EU electric carmakers fear a major disadvantage in the U.S. market. Because tax credits are available only with various free trade agreements with the US, but the US has no such agreement with the EU.
The German “Handelsblatt” stated that the minerals agreement reached by the United States and Europe may fundamentally change the competition for key minerals. A senior U.S. government official explained that the goal is to create a new network of supply chains for key raw materials, minerals and rare earths — with G7 countries as anchors, in contrast to China.
US and Europe plan to decouple rare earths from China
Europe and the United States to talk.
Aoki observed that the new mineral partnership established by the US and Europe stipulates four major elements:
“Light Trade Agreement”. A senior U.S. government official explained that cooperation is “very limited” to minerals critical to electric vehicles and batteries. So far there is no contract, only a statement of intent to negotiate. For example, traditional free trade agreements that lower tariffs and must be ratified are off the table. Negotiations should only last a few weeks rather than months or years.
The door opener of the Inflation Cutting Act. Once the raw material partnership is finalized, European battery manufacturers can still benefit from U.S. subsidies under the IRA. For example, an EU-based company could help supply lithium, nickel or other materials for electric vehicles built in North America and benefit from incentives.
China dominates the rare earth market.
So-called “friend outsourcing”. It would be a victory for the critical raw materials coalition that is at the heart of Biden’s security policy. The US is holding similar talks with Japan and the UK.
Natural Resources Coalition. The deal with the EU, Japan and the UK would be the first step in creating a new “buyers’ club” of critical minerals in the G7 – as neither the US nor the EU has many natural resources. That is why medium-term partnerships with resource-rich countries in Africa, Asia and Latin America are the goal.
U.S. officials explained that the G7 “buyers club” was a “welcome signal” that the EU wanted to free itself from China. “Concern about China on both sides is at an all-time high,” he said.
Rare earth deposits discovered in Sweden.
However, the United States will certainly not give the EU tax relief for electric vehicles to enter Europe in vain. To this end, the EU must help the United States to curb China’s rare earth influence.
“Handelsburg” said that on the eve of von der Leyen’s visit, few details about her plans were leaked because of the sensitivity of the planned agreement. Commodity cooperation is a challenge to China’s dominance in commodity markets. According to the IEA, China has more than 80% of the world’s rare earth refining capacity – and this will change in line with the wishes of the US and EU.
The US has not committed to making further concessions in the battle over the Inflation Cutting Act. But the US administration official said: “We expect and hope that Europe will follow suit.” Next week, the EU hopes to release details of its green industry plan. According to the annual threat assessment report released by the United States, the United States is increasingly concerned that China may use its strong position in the international supply chain to gain greater influence in the world.
The G7 plans to form a buyer’s club.
German media said that in a draft called the “Green Deal Industry Plan”, the European Commission set a 40% production target for member states in solar cells, wind turbines, electric vehicle batteries and heat pumps, in order to avoid sanctions on other countries such as China. dependency.
There are various signs that the EU is increasingly inclined to stand in the same trench as the United States. Nor has the EU learned from the energy crisis. If the EU finally moves towards the road of “decoupling rare earths” from China, the biggest losers in the end must be European countries.
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