Brussels, 14 June 2023 (TDI):Β  The European Commission has taken a step forward in its pursuit of a Critical Minerals Agreement (CMA) with the United States by adopting its negotiating directives.

The aim of the agreement is to strengthen EU-US supply chains for critical raw materials essential in the production of electric vehicle (EV) batteries. In 2022 alone, the EU exported €8.3 billion worth of critical raw materials relevant to the EV industry.

The conclusion of an EU-US CMA will grant the EU a status equivalent to US free trade agreement partners, in line with the US Inflation Reduction Act.

This will ensure fair competition for EU companies against US and third-country competitors such as Chile, the Republic of Korea, and Japan in the US market.

The CMA will also contribute to enhancing EU production capacities in strategically important industrial sectors. It will include robust environmental and labor provisions to promote the sustainable sourcing of critical raw materials.

Read more:Β European Union to promote sustainable aviation fuels

The agreement will support the European Commission’s proposed Net Zero Industry Act and Critical Raw Materials Act, aimed at expanding EU manufacturing of key carbon-neutral technologies.

The adoption of the negotiating directives empowers the Commission to engage in formal negotiations with the US on provisions related to trade facilitation, promoting sustainability in the critical raw materials sector, safeguarding labor rights, and strengthening sustainable and equitable supply chains through common standards and collaboration with allies and partners.

The next steps involve the Council’s consideration and decision on the proposal, after which the Commission can commence negotiations with the US, with the goal of promptly concluding the agreement.

Background

The US enacted the Inflation Reduction Act in August 2022, introducing the Clean Vehicle Credit subsidy. This tax credit supports the purchase of qualifying battery or fuel-cell-operated vehicles.

To be eligible for the full subsidy, vehicles must contain batteries with critical mineral content either recycled in North America or extracted and processed in the US or a country with which the US has a Free Trade Agreement or a CMA.

Without an EU-US CMA, EU firms face the risk of exclusion from US automotive supply chains, limiting their export opportunities.

The intention to negotiate a Critical Minerals Agreement was announced by the EU and the US in the Joint Statement on March 10, 2023, between President von der Leyen and President Biden, as well as in the EU-US Trade and Technology Council Joint Statement of May 31.