Aerial view of the brine pond and processing area of the lithium mine of the Chilean company SQM (Sociedad Quimica Minera) in the Atacama Desert in Calama, Chile, September 12, 2022.
Martin Burnetti | Martin Burnetti AFP | Getty Images
Analysts say lithium’s strategic importance likely played a big role in the European Union’s major deal with Brazil, Argentina and three other South American countries.
After 25 years of negotiations, the EU and the five Mercosur countries (an alliance that includes Paraguay, Uruguay and, newly, Bolivia) reached a long-awaited trade deal on December 6th.
If ratified by the 27-nation bloc, the EU-Mercosur partnership would create one of the world’s largest free trade zones. Estimation The region has a population of over 700 million people and accounts for approximately 20% of the world’s gross domestic product.
The European Commission, the EU’s executive arm, says the trade agreement will expand bilateral trade and investment, reduce tariff and non-tariff trade barriers, create more stable rules and promote shared values such as sustainable development. stated that it is aimed at.
However, not everyone is in favor of this agreement. France and Poland also expressed opposition to the deal, warning that it could create unfair competition for European agriculture.
Analyst at Dutch bank ING said The importance of key raw materials like lithium appeared to be “less talked about” in coverage of the free trade agreement, despite the metal’s importance to Europe’s economic future.
“a) the EU is highly dependent on China for critical raw materials, b) countries such as Argentina, Bolivia and Brazil have large reserves of some of these critical raw materials, and c) “This is surprising given that EU demand for raw materials is expected to continue to increase significantly,” ING analysts said in a research note published on Friday. .
“Although it may be difficult to quantify the precise economic value of improved access to these materials through a closer relationship with Mercosur, this particular factor is of great strategic importance to the EU. We believe that they had [Commission] “Especially when awarding contracts, as diversification, sourcing and security of supply are currently top priorities,” they added.
Lithium is also called “white gold” because of its bright color and high market value. considered as a key element in the transition away from fossil fuels. Commonly used in rechargeable batteries for electric cars, cell phones, and laptops.
Latin America is Estimation According to the International Energy Agency, it will supply about 35% of the world’s lithium, with Chile (26%) and Argentina (6%) leading the way. The region is estimated to contain more than half of the world’s lithium reserves, primarily located in Argentina (21%) and Chile (11%).
Lithium ‘essential to major industries’
European Commission President Ursula von der Leyen explained The EU-Mercosur trade agreement is a “win-win deal” that will save EU companies 4 billion euros ($4.24 billion) a year in export duties.
Meanwhile, the EU’s foreign policy chief, Kaja Kalas, stressed the importance of access to critical raw materials in a statement on the trade deal.
“This will open up a vast area for Europeans to trade freely, including access to critical raw materials, reducing the risk that competitors will replace us in our absence,” Karas said on Friday. said.
Aerial view of the evaporation pool for lithium extraction in the Salar de Olaroz, near the town of Olaroz Chico, Jujuy, Argentina, on July 1, 2024.
Luis Robayo | AFP | Getty Images
For Federico Steinberg, a visiting fellow in the Europe, Russia and Eurasia Program at the Center for Strategic and International Studies, a prominent American think tank, three factors made the agreement possible after a quarter-century of deadlocked negotiations.
The rise of protectionism “symbolized by the re-election of Donald Trump”, the fact that Brazil’s President Luiz Inacio Lula da Silva and Argentina’s Javier Millei were strong supporters of the deal, and It was an “important strategic consideration on the part of the EU”, including ongoing concerns. On the rapid expansion of Chinese trade and investment in Latin America.
Steinberg said that under the terms of the agreement, European companies are likely to have improved access to public procurement markets, high-value service sectors and critical raw materials such as lithium.
“In return, the European Union will contribute €1.8 billion through the Global Gateway Initiative to reduce tariffs on agricultural products and other goods and support Mercosur’s green and digital transition,” Steinberg said. said. said In a memo published Friday.
In December, Belgian and French farmers drove tractors into the French and Belgian city of Henchy/Crepin during a demonstration against the free trade agreement between the EU and Mercosur countries called for by the French farmers’ union Rural Coordination in Crespin, northern France. border closed. 5th, 2024.
François Lo Presti | AFP | Getty Images
Although some in Europe are unhappy with the proposed terms, the EU-Mercosur trade agreement is an umbrella group for German industrial services producers that employ around 8 million workers. It was warmly welcomed by the Federation of German Industry (BDI).
“The EU-Mercosur trade agreement provides a significant opportunity to diversify access to critical raw materials such as lithium and copper, which are essential for key industries such as electromobility and renewable energy,” BDI said. said said in a statement on December 6th.
It added: “At a time when global trade is increasingly fragmented, this trade agreement sends a clear and strategic message in support of free and rules-based trade.”
