Diversify supply chains, expand new partnerships: EU Commission President in Canada and the USA.
The President of the European Commission, Ursula von der Leyen, is currently in Canada and the USA for political talks. The talks will also focus on Europe’s supply of critical raw materials such as rare earths, which are needed for green technologies.
Since the EU sharply reduced its Russian energy imports as a result of the attack on Ukraine, the close economic ties with China, the world’s largest producer of rare earths, have also come under increasing scrutiny. Von der Leyen repeatedly warned against entering into new unilateral dependencies for the energy and mobility transition and made the case for raw materials agreements with “reliable” partners such as Canada, which wants to establish itself as a leading producer of critical minerals.
A corresponding strategic raw materials partnership with the EU has been in place since 2021; in a joint statement, the EU Commission chief and Canada’s Prime Minister Justin Trudeau now said they want to further commit to security of supply for critical minerals and related value chains. They said cooperation would help open up new trade and investment opportunities, while at the same time “supporting the highest environmental and social standards.”
A supply chain of the climate-friendly energy carrier green hydrogen is also to be developed. Specifically, an agreement has already been signed with Germany (we reported), with the first exports planned for 2025.
Controversial Inflation Reduction Act
Raw materials and the green transformation of the economy will also be topics during von der Leyen’s state visit to the United States. At the meeting with President Joe Biden scheduled for Friday, however, there will be a number of differences. The U.S. Inflation Reduction Act (IRA) has been straining transatlantic relations for months. The legislative package provides billions in subsidies for the domestic green tech industry and support for domestically produced electric cars. The EU speaks of protectionism and distortion of competition. A recent study shows that due to the threat of migration to the U.S., 68 percent of planned battery production is at risk across Europe, and as much as 80 percent in Germany.
Accordingly, von der Leyen could lobby to ensure that the EU’s electric vehicle industry also benefits from the IRA’s tax breaks. So far, exceptions have only been made for countries like Canada and Mexico, with which the U.S. has free trade agreements. Before the EU Commission President, German Economy Minister Robert Habeck and his French counterpart Bruno Le Maire, among others, have already tried to negotiate benefits for the EU.
Commodity club “from the U.S. to Ukraine”
The establishment of a “critical raw materials club with like-minded partners, from the U.S. to Ukraine” could also be broached, an idea that has been around for some time, including regarding the extension of IRA rules and benefits to other countries. Cooperation is also expected to strengthen supply chains and overcome unilateral dependencies.