Lithium's strategic importance can have played an enormous role within the European Union's blockbuster cope with Brazil, Argentina and three other South American countries, analysts say.
After 25 years of talks, the EU and five Mercosur countries (an alliance that features Paraguay, Uruguay and, more recently, Bolivia) reached a much-anticipated trade deal on December sixth.
If ratified by the 27-nation bloc, the EU-Mercosur partnership will turn into certainly one of the biggest free trade zones on this planet, covering an area of an area of an area of an area of an area of an area of an area of an area of an area of an area of an area of an area of an area of an area of an area of an area of an area of an area of an area of an area of an area of approx appreciated An area with greater than 700 million inhabitants, accounting for about 20% of world gross domestic product.
The European Commission, the EU's executive arm, said the trade deal goals to extend bilateral trade and investment, reduce tariff and non-tariff barriers, create more stable rules and promote shared values akin to sustainable development.
However, not everyone seems to be in favor of the agreement. France and Poland, amongst others, have spoken out against the agreement, warning that it may lead to unfair competition for European agriculture.
Analysts from the Dutch bank ING said The importance of critical raw materials akin to lithium appeared to “get fewer headlines” in coverage of the free trade agreement, despite the metal's importance to Europe's economic future.
“This is surprising considering a) the EU is heavily dependent on China for critical raw materials, b) countries such as Argentina, Bolivia and Brazil have large reserves of some of these critical raw materials and c) the EU’s demand for these materials is expected to rise massively,” analysts at ING said in a research note published on Friday.
“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 was of great strategic importance for the EU.” [Commission] in closing the deal – particularly as diversification or procurement and security of supply are currently the main focus,” they added.
Lithium, sometimes known as “white gold” resulting from its shiny color and high market value, is considered as an important a part of moving away from fossil fuels. It is usually utilized in electric vehicles, mobile phones and laptop rechargeable batteries.
Latin America is appreciated According to the International Energy Agency, the country will supply about 35% of the world's lithium, with Chile (26%) and Argentina (6%) leading the way in which. The region is estimated to host greater than half of the world's lithium reserves, mainly in Argentina (21%) and Chile (11%).
Lithium “essential for key industries”
European Commission President Ursula von der Leyen described the EU-Mercosur trade deal as a “win-win agreement” that may save EU corporations 4 billion euros ($4.24 billion) in export tariffs annually.
Meanwhile, Kaja Kallas, the EU foreign policy chief, stressed the importance of access to critical raw materials in her statement on the trade deal.
“For Europeans, it opens up a huge region for free trade, including access to critical raw materials, and reduces the risk that competitors will replace us in our absence,” Kallas said on Friday.
For Federico Steinberg, visiting fellow within the Europe, Russia and Eurasia program on the Center for Strategic and International Studies, a distinguished U.S. think tank, three aspects made an agreement possible after a quarter-century of stalled negotiations.
These were the rise of protectionism, “exemplified by the re-election of Donald Trump,” the incontrovertible fact that Brazil’s President Luiz Inácio Lula da Silva and Argentina’s Javier Milei were strong supporters of a deal, and “important strategic considerations on the EU side “, such as ongoing concerns about the rapid expansion of Chinese trade and investment in Latin America.
As part of the agreement, Steinberg said European companies would likely gain greater access to public procurement markets, high-value service sectors and critical raw materials such as lithium.
“In return, the European Union will reduce tariffs on agricultural products and other goods and contribute 1.8 billion euros through the Global Gateway Initiative to support Mercosur's green and digital transformation,” Steinberg said said in a note published Friday.
While some in Europe remain dissatisfied with the proposed terms, the EU-Mercosur trade deal has been warmly welcomed by the Federation of German Industries (BDI), an umbrella organization of German industry-related service corporations that employs around 8 million staff.
“The EU-Mercosur trade agreement represents an enormous opportunity to diversify access to critical raw materials such as lithium and copper, which are essential for key industries such as electromobility and renewable energy,” said the BDI said in a press release on December sixth.
“At a time of increasing global trade fragmentation, this trade agreement sends a clear and strategic message in support of free and rules-based trade,” they added.
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