An agreement between the US and the European Union over critical minerals would unlock wider benefits than previously thought, with a deal paving the way to remove several more trade barriers introduced by President Joe Biden’s massive green subsidy law, according to people familiar with the matter.
An accord would essentially allow EU companies to take advantage of some of the benefits in the Inflation Reduction Act on the 50 minerals defined as critical in the law, said the people who spoke on the condition of anonymity.
The Biden administration has said that nations with trade agreements with the US will be able access some of the IRA’s benefits, which will offer some $369 billion in handouts and tax credits over the next decade for clean-energy programs in North America. If the minerals accord is passed, it would act as the equivalent of a free-trade agreement and that status would in turn enable electric vehicles containing EU-extracted and processed critical minerals to be eligible for IRA subsidies, the people said.
The US Trade Representative’s office declined to comment.
An early draft of the EU-US minerals agreement lists five minerals — cobalt, graphite, lithium, manganese and nickel — covered by that standalone accord, Bloomberg previously reported. Such a deal would echo one that the Biden administration signed last month with Japan.
Advantages that extend beyond those five commodities would be welcome news to the EU, which last year exported €8.6 billion ($9.55 billion) worth of key minerals to the US, according to the Geneva-based Global Trade Monitor.
However, the benefits of having an FTA-like status through a minerals deal would not stretch to recycled critical minerals nor would it blunt final assembly provisions, which the IRA envisions taking place in North America, the people said.
The advantages would also include some battery parts, the people added.
The IRA has been a point of contention between the US and the EU. Brussels has said that aspects of the bill would unfairly discriminate against European companies and is seeking an exemption for European firms.
The EU is still working to figure out to what the extent the legislation will impact the bloc’s economy. Complicating this process is the fact that the IRA’s tax credits are essentially uncapped, so coming up with precise calculations depends on their uptake, the people said. The industries most likely affected by the legislation are the automobile, chemical and machinery sectors.
(By Alberto Nardelli, with assistance from Bryce Baschuk and Mark Burton)