Trade with the United States: EU Council authorises negotiations on EU-US Critical Minerals Agreement

The Council today adopted a decision authorising the Commission to open negotiations, on behalf of the EU, with the United States on a Critical Minerals Agreement (CMA) and the related negotiating directives.

This agreement seeks to strengthen critical minerals supply chains and mitigate some of the negative repercussions of the US Inflation Reduction Act (IRA) on EU industry.

The Critical Minerals Agreement will be key in diversifying international supply chains of critical minerals. It will also help to strengthen our cooperation in the context of the green transition. The agreement will grant the EU an equivalent status to US free trade agreement partners for the purpose of the Clean Vehicle Credit under the US IRA.

Héctor Gómez Hernández, Industry, Trade and Tourism Minister of Spain

Key elements of the decision

According to the directives for negotiation, the CMA should:

• contain provisions on strengthening international supply chains of critical minerals and related sectors
• be fully consistent with World Trade Organization rules and fully in line with the objectives pursued in the EU Critical Raw Materials Act, in terms of ensuring the EU’s access to a secure and sustainable supply of critical raw materials, and with the European Battery Alliance
• strengthen the trade in and diversification of international supply chains of critical minerals and promote the adoption of electric vehicle battery technologies by formalising the shared commitment to facilitate trade, and promote fair competition and market-oriented conditions for trade in critical minerals
• promote high levels of environmental protection and protection of workers in the critical minerals sector and encourage corporate social responsibility across critical minerals supply chains
• aim to prevent distortive and protectionist practices in critical minerals supply chains
• encourage cooperation on international standards for critical minerals lifecycle assessment, extraction, labelling, recycling and transparency, with a view to supporting sustainable supply chains, and help to prevent future barriers to EU-US trade

Background

In August 2022, the US enacted the Inflation Reduction Act (IRA), introducing the Clean Vehicle Credit. This is a subsidy for the purchase of qualifying battery or fuel-cell operated vehicles in the form of a tax credit. To qualify for the full subsidy, a vehicle must, among other things, be equipped with a battery that has had at least some of its 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.

In the absence of a comprehensive free trade agreement between the EU and the US, the conclusion of a targeted critical minerals agreement should enable relevant critical minerals extracted or processed in the EU to count towards certain IRA clean vehicle tax credit requirements, and contribute to fostering EU-US supply chains.

The CMA represents an opportunity to increase the attractiveness of investment in the EU’s mining and processing industry.

Next steps

Following the adoption of the mandate, the Commission will be able to engage in formal negotiations with the US with a view to concluding the agreement in the near term.

Once the negotiations have been finalised, the agreement would need to be adopted by the Council. The CMA would also require the consent of the European Parliament.

Compliments of the European Council, the Council of the European Union.