The EU-U.S. intention to negotiate a CMA, as announced on 10 March 2023, follows from the U.S. enactment of the Inflation Reduction Act (IRA) in August 2022. Under the IRA, the U.S. introduced the “Clean Vehicle Credit”, which is a subsidy or tax credit placed on the purchase of vehicles containing a qualifying battery or fuel cell. For a vehicle to be granted the subsidy in full, it has to contain a battery in which a part of the critical mineral content was recycled in North America or was extracted and processed in the USA. Alternatively, a part of the critical mineral content must have been extracted and processed in “a country with which the US has a Free Trade Agreement or a CMA”. In the absence of a CMA between the EU and the U.S., “EU firms are [said to be] at risk of being excluded from US automotive supply chains, reducing EU export possibilities”.
🌱 What will the CMA entail?
On 14 June 2023, the European Commission adopted “its negotiating directives for a [CMA] with the United States”. The Commission now plans to negotiate a CMA that will improve “trade facilitation, so that critical raw materials extracted or processed in the EU can be used in vehicles eligible for the US' Clean Vehicle Credit subsidies”. The Commission also plans to strengthen “cooperation to make the critical raw material sector more sustainable by encouraging high environmental protection, international technical standards and circular economy approaches”. The Commission has stated that it believes “[s]trong environmental and labour provisions [in the CMA] will help ensure [a] greater supply of sustainably sourced critical raw materials”.
🌱 What is the objective?
The European Commission has said that "[t]he objective [of the CMA] is to foster EU-US supply chains in critical raw materials needed in the production of electric vehicle batteries”. According to the Commission, “[i]n 2022 alone, the EU exported €8.3 billion worth of critical raw materials relevant to this industry”. The Commission believes that “[c]oncluding [the] CMA will ensure that as an ally, the EU is granted a status equivalent to US free trade agreement partners pursuant to the US Inflation Reduction Act”. The Commission argues that “EU firms will then be able to compete on a level playing field with US and third country competitors on the US market, such as Chile, the Republic of Korea, and Japan".