European Parliament, individual governments, manufacturers’ lobbies: a rage has raged around the electric car perfect storm of world politics. And, to understand the speech, to be able to know how far this fierce battle is going, now you have to fly to Washington. Here US trade sources explained that the most urgent goal at the moment is to strengthen supply chains in a sector dominated by China. This led to a historic agreement between former enemies in the automotive world: the United States and Japan who have just started working together on the trade front of essential minerals for electric vehicle batteries.
Supply problems
Indeed, we know that the elements of rare earths and minerals such as lithium are becoming increasingly important for clean energy technologies, but severe supply shortages are expected in the face of growing demand for electric vehicles. Hence the agreement between the United States and Japan which provides for the commitment not to impose export duties on critical minerals shipped to the other country. Such a thing had never been seen in the commercial history of the two countries which have always stood out for extraordinary surcharges on the importation of “enemy” products. Yet the agreement is now black and white and is in the statement issued by United States Trade Representative (USTR). Here she is: “The United States and Japan share an interest in strengthening supply chains between like-minded partners and increasing resilience against threats such as economic coercion.”
An entirely political question
We are at a turning point. And to understand “how political” this agreement is – as we said before – just read the statement by Ambassador Katherine Tai: “The agreement – she explained – marks a positive moment as Washington continues to work with allies and partners to strengthen supply chains”. The reference – quite clear – is to the deadly Inflation Reduction Act (IRA), which stipulates that 40 percent of the critical minerals contained in an eligible EV battery must be mined or processed in countries that have free trade agreements with America. And that the percentage is destined to rise to 80% in 2027. Initially the law would have excluded the European Union and Japan, causing concern on both sides. Translated, it means raising a wall to block the production of batteries in all other countries of the world. This explains the importance of this agreement just signed which now – effectively – opens the door for critical minerals processed in Japan to be eligible for certain US subsidies under the law. And as the policy often remains dead letter for lack of executive orders, the US Treasury Department has already announced it will issue a notice later this month with proposed guidelines on IRA requirements for critical minerals and battery components. . The deal covers the five most needed critical minerals for EV batteries and will be reviewed every two years, according to the sources.
The “case” of Europe
At this point, a sensational case opens for Europe, cut off from the whole world that counts in terms of electric cars. It is no coincidence that on the occasion of the visit of the President of the European Commission to the USA, Ursula von der Leyen and the president Joe Biden have announced the start of negotiations on a critical minerals agreement that allows relevant resources to be mined or processed in the European Union. The target? To ensure that the EU can also benefit from grants from theInflation reduction act, a 370 billion dollar package to be used for the reduction of greenhouse gases. But the road is all uphill because – from what we have seen to date – to have these super incentives, European companies must necessarily move their factories to the USA. It has already happened with the Volkswagen gigafactory and it will happen again.
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