An aerial view of the brine ponds and processing areas at Chilean SQM's lithium mine (Sociedad Quimica Minera) in the Atacama Desert, Calama, Chile, on September 12, 2022.
Martin Pernetti | AFP | Getty Images
Analysts say the strategic importance of lithium is likely to play a key role in the EU's massive deal with Brazil, Argentina and three other South American countries.
After 25 years of talks, the European Union and five Mercosur countries (the alliance that recently includes Paraguay, Uruguay and Bolivia) reached a highly anticipated trade agreement on December 6.
If the EU-Mercosur partnership is ratified by the 27-nation bloc, it will create one of the world's largest free trade zones, covering a large area. estimated Its population is more than 700 million and represents about 20% of the global GDP.
The European Commission, the executive arm of the European Union, said the trade agreement aims to increase bilateral trade and investment, reduce tariff and non-tariff trade barriers, create more stable rules and promote shared values, such as sustainable development.
But not everyone supports the agreement. France and Poland were among the countries that expressed their opposition to the deal, warning that it could create unfair competition for European agriculture.
Analysts at Dutch bank ING He said The importance of critical raw materials such as lithium appears to “occupy fewer headlines” in coverage of the FTA, despite the metal's importance to Europe's economic future.
“This is surprising, given that a) the EU is highly dependent on China for critical raw materials, b) countries such as Argentina, Bolivia and Brazil possess significant reserves of some of these vital raw materials and c) EU demand is expected to rise.” On these materials, analysts at ING said in a research note published on Friday: “This is a significant increase.”
“It may be difficult to quantify the exact economic value of better access to these materials through closer ties with Mercosur, but we believe that this particular element had significant strategic weight for the EU (Commission) when concluding the deal – especially with diversification,” they added. Sourcing and securing supplies is currently our top priority.
Lithium, sometimes referred to as “White gold“Due to its light color and high market value It is considered As a critical element in the transition away from fossil fuels. It is usually used in Electric vehiclesCell phones and rechargeable batteries for laptops.
Latin America is estimated To supply approximately 35% of the world's lithium, according to the International Energy Agency, with Chile (26%) and Argentina (6%). The region is estimated to contain more than half of the world's lithium reserves, located mainly in Argentina (21%) and Chile (11%).
Lithium 'essential to key industries'
European Commission President Ursula von der Leyen described The EU-Mercosur trade deal is a “win-win agreement” that could save EU companies €4 billion ($4.24 billion) in export duties annually.
Meanwhile, Kaja Kallas, the EU's foreign policy chief, highlighted the importance of access to vital raw materials in her statement on the trade deal.
“For the Europeans, it opens up a wide area of free trade with them, including access to vital raw materials, and reduces the risk of competitors replacing us in our absence,” Callas said on Friday.
An aerial view of evaporation ponds for lithium extraction at the Salar de Olaroz salt flat, near the town of Olaroz Chico, Jujuy Province, Argentina, on July 1, 2024.
Luis Rubaio | AFP | Getty Images
Federico Steinberg, a visiting fellow in the Europe, Russia and Eurasia Program at the Center for Strategic and International Studies, a prominent US think tank, believes that there were three factors that made an agreement possible after a quarter century of stalled negotiations.
This was the rise of protectionism, embodied in… Donald Trump“His re-election”, the fact that Brazilian President Luiz Inacio Lula da Silva and Argentine Javier Miley were staunch supporters of reaching an agreement and “important strategic considerations on the EU side”, such as Constant fears Regarding the rapid expansion of Chinese trade and investment in Latin America.
Under the terms of the agreement, Steinberg said European companies are likely to gain better access to public procurement markets, high-value service sectors and critical raw materials, such as lithium.
“In return, the EU will reduce tariffs on agricultural products and other goods and contribute €1.8 billion through the Global Gateway Initiative to support Mercosur’s green and digital transformation,” Steinberg said. He said In a memo published Friday.
Belgian and French farmers block the border in Henses/Crespin between France and Belgium with their tractors during a demonstration against the free trade agreement between the European Union and the Mercosur countries called for by the French farmers' union “Rural Coordination”, in Crespin, northern France on December 5, 2024.
François Le Presti | AFP | Getty Images
While some in Europe remain dissatisfied with the proposed terms, the EU-Mercosur trade agreement has been warmly welcomed by the Confederation of German Industries, an umbrella group for German service producers linked to industry that employs some 8 million workers.
“The EU-Mercosur trade agreement represents a tremendous opportunity to diversify access to important raw materials such as lithium and copper, which are essential for key industries such as electric mobility and renewable energy,” BDI said. He said In a statement on December 6.
They added: “In times of increasing fragmentation of global trade, this trade agreement sends a clear and strategic message in support of free and rules-based trade.”
