Editor’s choice
Editor’s choice
The recently enacted trade agreement between the EU and the Mercosur countries includes specific references to critical raw materials. These two trade blocs are in a position to lead the way towards responsible production of these materials central to the global energy transition.
At the beginning of last month, a trade agreement that had been under negotiation for over a quarter of a century between the EU and the Mercosur countries (Argentina, Bolivia, Brazil, Paraguay and Uruguay) finally went into effect. One trade flow mentioned in the agreement has the potential to turn this agreement on its head if not managed correctly, and it is not the initial focus of negotiations back in 1999.
Rather than goods manufactured in Europe or agricultural products from South America, the trade flow in question is critical raw materials (CRM), of which South American countries possess significant reserves. In particular, copper, lithium and graphite are highly sought after by European industries, as the expected demand for these minerals is rapidly growing in response to both security interests and the global energy transition away from fossil fuels and towards electrification, a transition that Europe aspires to lead.
The agreement would lower EU import tariffs on CRM, reduce tariff escalation barriers and ease rules for European firms to invest in refining and processing minerals locally within the Mercosur region. This aligns with the recently enacted EU Critical Raw Materials Act, which for any given CRM dictates “no more than 65% of the EU’s annual consumption from a single third country”. A target such as this is a clear response to the dominance that China has assumed within the global CRM marketplace.
Given China’s current dominance, the narrative surrounding global CRM demand is increasingly framed within the language of geopolitics and statecraft, of securitization. Beyond the EU, other actors such as the US are positioning themselves to secure access to CRM around the world, attempting to counter the reliance on China’s dominance over CRM production.
This focus on securitization is not wrong. It misses, however, important trade-offs between security and other imperatives within CRM governance. Policymakers and other practitioners need to navigate trade-offs between security-related and other motivations, such as those related to the environment and human rights, which are insufficiently understood and require more research and public debate. A limited focus on national security, geopolitics and statecraft is not sufficient if we are to avoid the harm associated with the era of fossil fuels, an era that must wane with the global energy transition.
Within this global context, the EU-Mercosur agreement offers an opportunity to begin to expand the scope of the current CRM narrative beyond the realm of pure securitization. The work required over the coming months and years to translate the text of the EU-Mercosur agreement into actual political and commercial commitments can become a learning laboratory between willing partners towards this end, offering an example for those developing the myriad of fragmented public-private or private-private initiatives in CRM commerce and governance currently proliferating around the world.
Some key questions that should guide work within this timely and unique learning laboratory include:
In this living laboratory, researchers, policymakers and stakeholders can explore approaches and techniques that the EU and Mercosur can develop and deploy so that environmental and social harm can be compared across landscapes as diverse as northern Sweden and the Argentine Puna. The results of that work have implications for how the rest of the world struggles with these and other questions.
The list above is by no means a comprehensive list of guiding questions. These and other questions have emerged from a series of reflections carried out among researchers within SEI working with CRM-related projects across a range of scales, geographies and topics.
A range of issues beyond geopolitics should inform all conversations surrounding responsible CRM development in response to the global energy transition, not just those currently taking place between the EU and the Mercosur countries. We have framed the questions from the perspectives of the EU and Mercosur because we believe that these two regions actually have the opportunity, and the ability, to lead the world in demonstrating what responsible CRM development should look like, beyond the fixation on securitization that currently frames the global narrative. It is time for more systematic research that can lead the way.
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