This article is part of our special report Critical raw materials.
When COVID-19 hit Europe and disrupted global supply chains, the EU came to a sobering realisation – it cannot continue to rely solely on imports for raw materials.
For some EU policymakers in Brussels, this awareness of needing autonomy when it comes to lithium and rare earths, materials critical for digital and green industries, was a silver lining of the pandemic.
“[The pandemic] has revealed the EU’s problematic dependence on third countries for active pharmaceutical ingredients and medical supplies,” said Anna-Michelle Asimakopoulou, a Greek lawmaker in the European Parliament.
Looking ahead, she warned that Europe should be equally worried that the raw materials necessary for the green and digital transitions are sourced mostly from other regions.
“Europe’s ‘green recovery’ will be based on industrial leadership in the production of computers, batteries, electric vehicles, and wind turbines,” Asimakopoulou wrote in an opinion piece for EURACTIV.
“But we are increasingly reliant on China and other regions for supplying the metals and minerals required by those technologies,” she said, calling on the European Commission to defend EU industries against Chinese dumping and America’s “out-of-control tariff diplomacy” under President Trump.
The wake-up call reverberated across the EU institutions in Brussels and beyond.
“This confirmed our analysis,” said Thierry Breton, the EU’s internal market commissioner, speaking at a Brussels event to mark the launch of the industry-led European Raw Materials Alliance last week. “We need to think more strategically to anticipate other possible disruptions in future.”
As Europe emerges from the COVID-19 crisis, it must boost its “own domestic capacity for primary raw materials” as well as secondary materials obtained through recycling and re-use, Breton said.
But opening new mines in Europe isn’t the whole solution, he added.
“It is not sufficient to have the raw materials if we do not have the processing facilities in Europe,” he warned, saying loopholes need to be closed across the raw materials value chain.
At the moment, Europe is heavily reliant imported raw materials from a small number of foreign countries. China provides 98% of the EU’s rare earth elements, while Turkey supplies 98% of the bloc’s borate and South Africa covers 71% of the EU’s needs for platinum.
“There are also many of these materials present in Europe. And that’s the good news,” he said, citing reserves of cobalt, bauxite, beryllium, bismuth, gallium, germanium, indium, niobium and borate.
The pressing question now is how fast Europeans can develop mining, refining and recycling capacities and how dependent it will be on imports while it does so.
In some cases, the Commission believes Europe can move swiftly. On lithium, for instance, Breton said the EU is positioning itself to be almost self-sufficient by 2025.
For rare earths, the process will be longer, officials told EURACTIV. The aim is to have European mining and refining capacity operational by the start of the next decade. In the meantime, that means ensuring “diversified and undistorted access to global markets for sustainably sourced raw materials,” Breton said.
‘Open strategic autonomy’
To encapsulate the seemingly conflicting priorities of self-sufficiency and promoting free trade, policymakers have coined a new term: “open strategic autonomy”.
The phrase comes up eleven times in the action plan on critical raw materials, published by the European Commission last month.
But what does the expression actually mean? Commissioner Breton tried giving a definition when he launched the Raw Materials Alliance last week:
“When we speak of strategic autonomy – or what is sometimes referred to as sovereignty or resilience – we are not talking about isolating ourselves from the world, but having choice, alternatives, competition. Avoiding unwanted dependencies, both economically and geopolitically.”
The Commission’s action plan on raw materials gives the concept additional substance.
“Global trade and its integrated value chains will remain a fundamental growth engine and will be essential for Europe’s recovery,” the EU executive remarks in a footnote buried on page 1 of its raw materials communication.
“With this in mind, Europe will pursue a model of open strategic autonomy. This will mean shaping the new system of global economic governance and developing mutually beneficial bilateral relations while protecting ourselves from unfair and abusive practice.”
Buy-in from European capitals
Remarkably, the Commission’s wake-up call on raw materials supply seems to resonate beyond EU policy circles in Brussels.
In Warsaw, the deputy prime minister in charge of development, Jadwiga Emilewicz, supported the Commission’s drive for “strategic autonomy” of raw materials, saying it could “bring hope for people working in the black coal mines” of Poland.
Peter Altmaier, the German minister for economic affairs and energy, was among the speakers at the launch event of the European Raw Materials Alliance. Eight years ago, when he was serving as environment minister, he said raw materials were not seen as such a pressing issue.
“Today, we know it is an utmost important challenge,” Altmaier insisted, saying the digital transformation and the EU’s decision to become climate neutral by 2050 have changed perceptions.
German companies have faced “growing international protectionism” on raw materials, Altmaier pointed out. “Many countries are trying to protect their own markets and secure privileged access to raw materials,” he remarked, saying this is “a matter of concern” on which Europeans “have to act”.
“We must support companies and the actors in the field of raw materials,” the German minister said, speaking in favour of boosting domestic production of minerals like lithium, which are necessary for the manufacturing of electric car batteries.
At the same time, he said boosting domestic production and recycling efforts wouldn’t be enough to reduce imports significantly because demand for items like battery cells is going to “increase exponentially” in the future.
“Therefore, we need domestic raw materials and, at the same time, we need to make sure that we have access to raw materials like lithium and cobalt from other regions of the world,” Altmaier said.
Canada and Australia are among the countries that have shown interest in deepening trade relations with the EU on raw materials.
Earlier this year, the World Bank predicted a 500% increase in the production of minerals such as graphite, lithium and cobalt by 2050, noted Seamus O’Regan, Canada’s minister of natural resources.
“This represents an incredible opportunity. And Canada is ready to lead,” O’Regan told the raw materials event. The North American country is “one of the only nations in the western hemisphere with vast deposits of the minerals needed to make the next generation of electric batteries: cobalt, graphite, lithium, nickel – we got them all,” the minister said.
What’s more, “Canada could meet the entire EU demand for germanium, magnesium, coking coal, niobium and graphite,” O’Regan added, saying Canada also harbours the companies capable of extracting and processing rare earth elements.
Closer to home, Europe is looking at importing raw materials from countries like Serbia, Albania and Ukraine. These countries have “very solid reserves” of many critical raw materials, said Maroš Šefčovič, the Commission vice-president in charge of foresight.
“I think that would bring a new positive chapter in our relationship,” he told EURACTIV in an interview.
Ramping up pressure on China
By diversifying its imports and boosting home production, Europe aims to exert more leverage on China when it comes to trading raw materials.
The EU strategy includes applying anti-dumping measures on imports of materials like aluminium, which EU producers say are currently flooding the European market.
China’s excess aluminium production currently stands at 10 million tonnes, 5 times the total EU production. While European producers are reeling from the corona crisis, “China is leveraging the crisis to ramp up aluminium production even further,” said Gerd Götz, Director General at European Aluminium, a trade association.
“China is capable of wiping out and replacing the entire European aluminium industry in no time if the EU does not act assertively,” Götz warned.
The EU strategy doesn’t stop at anti-dumping measures or import diversification. Another key part relates to environmental and labour standards, which Europe wants to impose on all its trading partners – a concept Šefčovič refers to as “competitive sustainability”.
Back in December, Šefčovič said the EU would only import battery cells which adhere to the bloc’s stringent environmental and labour standards. Those that don’t would be banned from entering the EU market, he warned.
“We believe that sustainability will be the key selling point in the near future,” he told EURACTIV, saying European consumers would not accept buying cars or phones made from minerals mined using unethical labour and environmental practices.
The move is part of a broader EU push to enforce “reciprocity” in trade relations, which now includes environmental standards. In 2018, the EU and Canada inserted a climate clause into CETA, the bilateral trade agreement which came into force in 2017.
Both sides agreed to “promote the mutual supportiveness of trade and climate policies”, with reference to their Paris Agreement commitments. Earlier in 2018, a similar climate clause was added to an EU-Japan trade deal, a move touted as the first of its kind in a major trade deal.
The European Commission has threatened to impose a carbon border tax on countries doing too little on climate change, reflecting the EU’s more assertive stance on trade and its determination to protect European companies from cheaper products made in countries seeking a competitive advantage from lower environmental standards.
The tax “should motivate foreign producers and EU importers to reduce their carbon emissions, while ensuring that we level the playing field in a WTO-compatible way,” said Ursula von der Leyen, the President of the European Commission.
The EU executive said a concrete proposal for the tax is being prepared and should be published in 2021 and implemented in 2022.
For Šefčovič, the potential reward for China continuing to trade with the European bloc is access to the EU’s internal market of 450 million consumers.
“The offer to the Chinese is that they will have access to the biggest trading bloc on this planet,” Šefčovič told EURACTIV. “We are the number one trading partner for China. They’re our number two trading partner.”
“So I think that, yes, we are currently dependent on getting some of these critical materials from China, but they’re also very dependent on having us as an important partner in the future,” he added, expressing confidence that Europe’s “call for fair treatment, for reciprocity, is well understood” in Beijing.
Europe’s pressure on China seemed to bear fruit last month when Beijing announced plans to become “carbon neutral” by 2060, bowing to one of the key demands from Brussels.
The need to add a green focus to Europe’s trade agenda has become more urgent with the EU’s decision to raise its carbon reduction target for 2030 and aim for climate neutrality by 2050.
As the European Union embarks on the journey towards net zero emissions, Europe’s more assertive stance on trade and climate change are being heard at the highest levels of the EU hierarchy.
“We must insist on fairness and a level playing field,” said Ursula von der Leyen, President of the European Commission in her first annual state of the union address to Parliament last month, citing ongoing work on a carbon border tax. “Europe will move forward – alone or with partners that want to join.”
European Council President Charles Michel echoed those sentiments. In a recent speech, he talked up the concept of “strategic autonomy” for Europe, emphasising that discussions are now taking place at the highest level.
“Autonomy is not protectionism, quite the opposite,” Michel said, insisting that the EU’s position as “the world’s largest trading bloc” gives it leverage over other nations.
Europe’s power “is the ability to spread rules and standards across the globe,” he said, citing the EU’s general data protection regulation, which set a global standard for online privacy protections.
Climate diplomacy, Michel added, is becoming “a new strategic front where Europe can win the battle of standards”.
“By pioneering environmental technologies and setting the relevant standards, we will achieve two goals: taking the lead in that field, and helping to win the fight against global warming,” he said.
[Edited by Kira Taylor and Zoran Radosavljevic]