BIDEN, EU LEADER TALK TRADE, UKRAINE
Deal sought on minerals used in electric vehicles
President Joe Biden and Ursula von der Leyen, the president of the European Commission, opened negotiations on Friday over the critical minerals used in electric vehicles amid concerns of a potential trade war triggered by the Biden administration’s signature clean energy legislation.
The recent tensions with European allies center on provisions in the legislation that offer tax credits to American consumers to buy new and used electric vehicles. The law restricts the credit to vehicles built in North America and has strict requirements around the source of critical minerals used to make their batteries, pitting Biden’s efforts to bolster domestic manufacturing against concerns over trade protectionism.
The limited new trade deal under discussion would help European companies qualify for more tax credits being offered in the United States. In the longer term, officials said, the deal would provide a framework for creating a club of countries that could mine, process and trade critical minerals, in an effort to wean the electric vehicle industry off its current heavy reliance on China as a source of those minerals.
“The goal is to have an agreement on critical raw materials that have been sourced or processed in the European Union, that these strategic supply chains are able to access the American market as if they’ve been sourced in the United States,” von der Leyen told reporters after her meeting at the White House. “So also
access to all the necessary benefits from the United States.”
In a separate initiative, the governments said they would begin coordinating more closely in distributing generous new subsidies to the clean energy industry. That coordination would aim to avoid a situation in which companies might try to start bidding wars between the United States and Europe over where to build new plants.
Biden and von der Leyen also aimed to portray a unified front in confronting Russia over its invasion of Ukraine. Both leaders committed to limiting the impact of the energy crisis in Europe as the European
Union reduces its reliance on Russian oil and gas, and to aggressively enforce sanctions that have been imposed on Moscow. Von der Leyen told reporters that a strong focus of the discussion was on “the question of sanctions.”
The United States and the European Commission will also work to address “third-country actors” who have supported Russia’s invasion of Ukraine, their joint statement said. The Biden administration has previously used the term to refer to China.
“I told you then times have changed from the previous administration,” Biden told von der Leyen at the start of the meeting, referring
to their first discussions two years ago about former President Donald Trump’s skeptical views about the value of the NATO alliance. “We view the EU as a great addition to our security and economic security.”
In their statement, the leaders said a potential agreement over critical minerals would strengthen the allies’ dependence in the supply chain. Biden has said one of his primary goals is to reduce reliance on China in the supply chain.
The critical minerals agreement “would further our shared goals of boosting our mineral production and processing and expanding access to sources of critical minerals that are sustainable,
trusted, and free of labor abuses,” the statement said.
The governments also said they planned to finish negotiations over reducing carbon emissions in the steel and aluminum sector by October. That deal would also be open to other countries that commit to reducing their emissions to join.
The deal over critical minerals could also take months to be finalized. European officials said they would need to seek a mandate from their member states to negotiate a trade deal on their behalf and submit the deal to the states for their approval. The Biden administration could have a more straightforward process, issuing such an agreement with an executive order.
But, if realized, it is likely to put to rest what has become one of the most contentious issues in an otherwise close partnership. Governments in Europe, South Korea, Japan and elsewhere have complained that the Biden administration’s signature climate legislation, the Inflation Reduction Act, discriminates against their companies by putting tight requirements on where electric vehicles and their battery materials are made.
The law requires vehicles that receive tax credits to be assembled in North America, and have batteries with components sourced from North America or countries with which the United States has a free-trade agreement. The United States has such agreements — which are typically broad in scope and need the approval of Congress — with 20 countries, but not the European Union, Japan or Britain.
But U.S. and European officials have found what they believe to be a workaround. Since the Inflation Reduction Act does not technically define what constitutes “a free-trade agreement,” they believe the countries are able to meet the requirement by signing a more limited trade deal instead.
According to people familiar with the discussion, the agreement over critical minerals could be as short as just a few pages detailing commitments on issues like sustainability and supply chains. The Biden administration is also carrying out similar talks with Japan and Britain about joining such an arrangement.
Treasury Secretary Janet Yellen said any agreements would be made in consultation with Congress.