US and EU pursue trade agreement for battery minerals to patch up conflict over subsidies regarding Inflation Reduction Act

US and EU pursue trade agreement for battery minerals to patch up

conflict over subsidies regarding Inflation Reduction Act

Considering participation of Japan and UK as well…

Pursuing additional agreements with resource-rich Ukraine and African countries

Officials of the U.S. and E.U. are known to be discussing a plan to form a cooperative group for procurement of EV battery minerals, in order to patch up conflict that was sparked by the issue of EV subsidies in the U.S. Inflation Reduction Act. On February 15 (local time), the Wall Street Journal reported as such, quoting various sources, and saying that the U.S. will discuss the establishment of a trade agreement that focuses on minerals, together with allies such as the E.U., Japan and U.K., according to a so-called plan to set up a “critical-minerals club”.

Furthermore, these countries are planning additional agreements with Ukraine and Zambia in order to acquire supply sources for raw materials that are essential for environmentally-friendly energy technology including EV batteries, which would become possible with the establishment of the trade agreement for minerals among allies.

Previously, upon the visit to the U.S. by Robert Habeck, Vice Chancellor and Federal Minister for Economic Affairs and Climate Action of Germany, and Bruno Le Maire, Minister of Economy of France, the U.S. and E.U. agreed upon pursuing the establishment of a “Critical-Minerals Club” in order to reduce dependence on China for core minerals required by batteries.

According to analysis, this club is being established to include the E.U., which has not established a Free Trade Agreement with the U.S., as a target of subsidies in accordance with the provisions of core battery minerals of the Inflation Reduction Act. In order to receive a tax credit for EVs pursuant to the Inflation Reduction Act up to USD 7,500 (about KRW 9.62 mln) per vehicle, the vehicle must have installed a battery which contains critical minerals mined and processed in the North American region or a FTA partner of the U.S. at a minimum of a certain percentage.

Maro？ ？ef？ovi？, Vice President of the European Commission, said in a Wall Street Journal interview, that he had visited the U.S. this week, and that a discussion had been held on the set up of a club. He hoped that common environment and investment-related standards could be established for extraction of critical minerals by both sides. “We want to have a comprehensive approach to the critical raw materials,” he said. “And I think that especially in setting the standards, in the outreach to the third countries, the cooperation with the U.S. would be very important.”  

Under the proposal, Mr. ？ef？ovi？ said that members of the critical-minerals club could reach out to various suppliers, including countries in Africa as well as Ukraine, about buying minerals. He said such outreach could help Western countries compete with China and Russia for influence in Africa, while drawing Ukraine closer to the EU. “I think (due to the invasion of Ukraine by Russia) that the situation of the last year with the supply of fossil fuels just showed us how dangerous and expensive the dependency on one supplier is,” Mr. ？ef？ovi？ said.

[Provided by Yonhap News]