US-Japanese agreement on electric vehicles in the main IRA. Preview about the European Union?

US-Japanese agreement on electric vehicles in the main IRA.  Preview about the European Union?

Cooperation between Washington and Tokyo runs through the supply chain for vital materials: the new agreement prevents both from imposing bilateral tariffs on exports. Thus, countries aim to protect their industries from Beijing’s moves. This is what that means for Europe

The road to transition is paved with important raw materials, and geopolitical Western countries are moving to strengthen their supply chains. the New trade agreement Between the United States and Japan, signed by the Trade Representative Catherine Tay And the ambassador Tomita Koji Going in this direction: The two allies pledged not to impose bilateral restrictions on exports of the most important minerals for electric vehicle batteries, including lithium, nickel, cobalt, graphite and manganese.

The benefits are mutual. On the other hand, the agreement guarantees Japanese automakers access to Inflation Reduction Act subsidies, the maximum US package of $370 billion that provides tax breaks for the production of batteries and electric cars. It’s the same solution being explored by Brussels, which, like Tokyo, has criticized the IRA’s protectionist measures: With the agreement, countries can now include Japan among the third countries (currently Canada and Mexico) that it considers a “clean” source of electric vehicle components.

On the one hand, Washington has just gained the advantage of a country with a highly developed automobile industry, as well as its own value chains. And by conducting export controls, the United States has firmly ensured that Japan is one of its partners. The goal has been explicitly stated by Biden administration officials: It works to combat “non-market policies and practices” and reduce both countries’ dependence on China, which has an extremely strong grip on the auto battery sector.

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Speaking to the media on Monday, US officials expected the deal to also include periodic reviews of foreign investments in supply chains for critical minerals. They explained that it was necessary to strengthen these chains “with like-minded partners”; We need to foster cooperation that is “vital to the growth of the clean energy economy” and able to “enhance economic security and stability, and ensure that the United States and its allies and partners are not dependent on other nations for critical minerals.”

This is the concept of cooperation with countries like-minded number at the beginning communication Released by the White House after the meeting between Ursula von der Leyen And Joe BidenAt the beginning of March. The document makes clear that EU-US cooperation is based on “shared values ​​and principles” and will also include diversification of supply chains for critical minerals and batteries: Brussels and Washington announce the start of negotiations on a “critical minerals agreement” to allow those mined or processed in the EU to meet requirements for tax exemptions for the Irish Republican Army.

The future agreement between the EU and the US is necessary “also to reduce unwanted strategic dependencies in these supply chains and to ensure their diversification and development with reliable partners”. In June 2022, this American push led to the creation of the Minerals Security Partnership: a group of trusted countries, in fact, to which Italy joined in February. And it is very likely that this solution will form the basis of a future agreement between Washington and Brussels: the Critical Raw Materials Act, recently introduced by the European Commission, contains instructions for the creation of a “club” for critical raw materials between Like-minded partners.

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The US Treasury Department is expected to finalize procurement requirements for electric vehicle tax aid by the end of the week. Japanese Trade Minister on Monday Yasutoshi Nishimura He said electric cars made from minerals mined or processed in Japan must meet the requirements. With fleeting ownership, this should also be true of European producers once the agreement is finalized, allowing the Allies to leave months of IRA friction behind.

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