Aerial view of the brine ponds and processing area of SQM (Sociedad Quimica Minera) lithium mine in Calama, Atacama Desert, Chile, September 12, 2022.
Martin Bernetti | AFP | Getty Images
Analysts say lithium’s strategic importance may have played a role in the EU’s blockbuster deal with Brazil, Argentina and three other South American countries.
After 25 years of negotiations, the European Union and the five Mercosur countries – a union that includes Paraguay, Uruguay and the newly formed Bolivia – reached a much-anticipated trade deal on December 6.
If approved by the 27-nation bloc, the EU-Mercosur partnership will create one of the world’s largest free trade areas covering estimated It has an area of over 700 million people and accounts for approximately 20% of global gross domestic product.
The European Commission, the EU’s executive agency, said the trade agreement aims to increase bilateral trade and investment, reduce tariffs and non-tariff trade barriers, develop more stable rules and promote sustainable development and other common values.
However, not everyone is in favor of the agreement. Countries including France and Poland have expressed opposition to the deal, warning it could bring unfair competition to European agriculture.
Analyst at Dutch bank ING explain Despite their importance to Europe’s economic future, the importance of critical raw materials such as lithium appears to “lessen the headlines” in reports of free trade agreements.
“This is surprising because a) the EU is very dependent on China for critical raw materials, b) countries such as Argentina, Bolivia and Brazil hold large reserves of some of these critical raw materials, and c) EU demand for these materials is expected to increase significantly. ,” ING analysts said in a research note released on Friday.
“It is difficult to quantify the exact economic value of better access to these materials through a closer relationship with Mercosur, but we believe this particular factor was of great strategic importance to the European Union (Commission) in concluding the deal — —Especially in situations of diversification or where sourcing and securing supply are current priorities,” they added.
Lithium is sometimes called “white gold” due to its light color and high market value. regarded as as a key component in transitioning away from fossil fuels. It is commonly used in rechargeable batteries for electric vehicles, cell phones and laptop computers.
Latin America is estimated According to the International Energy Agency, the country supplies about 35% of the world’s lithium, with Chile (26%) and Argentina (6%) leading the way. The region is estimated to hold more than half of the world’s lithium reserves, mainly in Argentina (21%) and Chile (11%).
Lithium ‘vital to critical industries’
European Commission President Ursula von der Leyen descriptive The EU-Mercosur trade agreement is a “win-win agreement” that can save EU companies worth 4 billion euros ($4.24 billion) in export tariffs every year.
Meanwhile, EU foreign policy chief Kaya Callas stressed the importance of access to key raw materials in a statement on the trade deal.
“For Europeans, it opens up a vast free trade area, including access to key raw materials, and reduces the risk of competitors replacing us in our absence,” Karas said on Friday.
An aerial view of the lithium extraction evaporation pond in the Salar de Oralós near the town of Oralós Chico, Jujuy province, Argentina, on July 1, 2024.
Luis Robayo | AFP | Getty Images
Federico Steinberg, a visiting scholar at the Europe, Russia, and Eurasia Program at the Center for Strategic and International Studies, a well-known American think tank, believes that after a quarter of a century of stagnant negotiations, there are three factors that made it possible to reach an agreement. Agreement is possible.
These include the rise of protectionism, “exemplified by the re-election of Donald Trump,” the strong advocacy of a deal by Presidents Luiz Inácio Lula da Silva of Brazil and Javier Mire of Argentina, and ” important strategic considerations on the part of the EU,” such as ongoing concerns about the rapid expansion of Chinese trade and investment in Latin America.
Steinberg said that under the terms of the deal, European companies could have better access to public procurement markets, high-value services and key raw materials such as lithium.
Steinberg said: “In return, the EU will reduce tariffs on agricultural products and other goods and contribute 1.8 billion euros through the Global Gateway Initiative to support the green and digital transformation of Mercosur.” explain in a report released Friday.
In December, in Crespin, northern France, Belgian and French farmers used tractors to block the Hensis/Crespin border between France and Belgium to protest against the EU-Mercosur call called by the French Farmers’ Union “Rural Coordination” Free trade agreement between the countries in May 2024.
François Lou Presti | AFP | Getty Images
Although some European countries remain unsatisfied with the proposed terms, the EU-Mercosur trade agreement has been warmly welcomed by the Confederation of German Industry (BDI), the umbrella organization for German industry-related service producers that employs About 8 million workers.
“The EU-Mercosur trade agreement offers huge opportunities to diversify access to critical raw materials such as lithium and copper, which are vital for key industries such as electric vehicles and renewable energy,” BDI said. explain in a statement on December 6.
They added: “In an era of increasing fragmentation of global trade, this trade agreement sends a clear strategic message supporting free and rules-based trade.”
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