Critical Raw Materials: Whats Going On?
The ABCI/WCL Webinar Critical Raw material: Whats going on took place on July 24. It featured the University of St. Gallen professor Simon Evenett, who presented the main conclusion of the recently released 31st Global Trade Alert (GTA) Report: The Scramble for Critical Raw Materials: Time to Take Stock?
Critical raw materials can be defined as highly economically important inputs, with a high risk of supply disruption due to their concentration of sources and lack of good, affordable substitutes. The discussion about critical raw materials, such as lithium and fertilizers, has been heated.
One of the main reasons behind the controversy is Climate Change mitigation policies, such as the green energy transition. In the United States, the Inflation Reduction Act, and the associated stimulus to domestic production of electric vehicles have caused the current and future demand for lithium to skyrocket.
Another reason is the fear that governments are weaponizing trade in critical raw materials. For instance, the Russian and Ukrainian conflict has threatened the world supply of fertilizers. China announced in early July that it would restrict exports of gallium and germanium as retaliation over chips curb by the United States and others.
The uncertainty regarding the supply of these critical raw materials has motivated developed and developing countries to adopt unusual measures, like export restraints or even export bans, and to foster bilateral trade negotiations specifically about critical raw materials.
The European Union has recently put forward a European critical raw materials act. The act aims to increase and diversify the EUs critical raw materials supply; to strengthen circularity, including recycling, and to support research and innovation on resource efficiency and the development of substitutes.
Furthermore, the European Council has just announced the decision to authorize the European Commission to open negotiations, on behalf of the EU, with the United States on a Critical Minerals Agreement (CMA) and the related negotiating directives.
Simon Evennet introduced the 31st GTA Report, highlighting 5 main messages:
- Some raw materials are importantbut designating them critical is a magnet for rent-seeking.
- Beware of much of the narrative surrounding CRMsa lot of it cannot be supported by evidence. In particular, the GTA report challenged the narrative or 4 episodes of export restraints or bans, including China controlled exports of rare earth to Japan in 2010 and Indonesia export ban on nickel ores in the second decade of 21st Century.
- Difficult to see how current unilateral and bilateral/group approaches will result in enough supply of CRMs.
- Badly managed CRMs can become an unnecessary source of trade tensions.
- Pursing a Thick Markets (i. e,. large markets with little or non-market differentiation) approach brings together the interests of potential buyers and sellers of CRMs.
The Webinar was moderated by Mirian Campos. ABCI board (Aluisio de Lima Campos, Mirian Campos, Victor Oliveira Leite, and Sergio Goldbaum) and 51画鋼 Washington College of Law (Program on Trade, Investment and Development) organized it, with the institutional support of Arnold & Porter, Tozzini Freire Adv and Carla Junqueira & Associated Trade law.
Watch the webinar .油