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TWN
Info Service on WTO and Trade Issues (Apr26/17) Yerevan, 28 Apr (D. Ravi Kanth) -- The United States on 24 April unveiled an agreement on the "United States- European Union Action Plan for Critical Minerals Supply Chain Resilience," which would "serve as the primary US-EU mechanism to coordinate trade policies and measures on critical minerals supply chains." According to a statement by the United States Trade Representative (USTR), Ambassador Jamieson Greer, the move appears to be primarily targeted against breaking China's dominance in this vital sector on which the modern economy runs. Although China is not named in the proposed "binding plurilateral agreement on trade in critical minerals", the sub-text of the agreement indicates a collective trans-Atlantic fight against China's long-built dominance in the critical raw mineral supply chain. Even as the trans-Atlantic trade giants remain at loggerheads on several trade issues - including US President Donald Trump's latest threat against the domestic services tax imposed by some European countries - they appear determined to leave no stone unturned in creating a new plurilateral order for critical raw minerals, with a coalition of select countries bound by stringent conditions. Analysts note that it is commonplace for the US, the EU, Japan, and several other countries to spend tens of billions of dollars to challenge China's dominance in critical raw mineral supply chains. In announcing the action plan for critical minerals on 24 April, USTR Ambassador Greer stated: "The United States and the European Union share a commitment to addressing the non-market policies and practices that have distorted critical minerals supply chains." The USTR's latest pronouncement appears to be aimed at China, against which it is ramping up pressure on the so-called "level-playing-field" issues - now being pursued as part of the "WTO reform" agenda. Ambassador Greer stressed that the two sides "will explore how trade measures, such as border-adjusted price floors, can strengthen our domestic critical minerals industries and the downstream sectors critical to our industrial competitiveness." As part of the new understanding, the two sides announced an action plan that includes new rules and conditions for making substantial contributions to ensure supply chain resilience, as well as providing subsidies in the event of sudden drops in the prices of critical minerals. The action plan for critical minerals supply chain resilience includes several conditions and parameters. To begin with, it states: "In recent decades, distortions resulting from pervasive non-market policies and practices have left critical minerals supply chains of market-oriented economies vulnerable to a myriad of disruptions, including economic coercion." Without touching on the US unilateral reciprocal tariffs that have destabilized the global trading system - prompting the EU to substantially reduce its tariffs - the two sides highlighted economic coercion and disruptions allegedly caused by China, though China was not mentioned by name. Somewhat unabashedly, the US and the EU claimed that "correcting these vulnerabilities is imperative," even as the reciprocal tariffs - previously dismissed by the US Supreme Court - are likely to be re-imposed under several provisions of the US Trade Act of 1974. The two sides asserted that "critical minerals are strategic assets integral to modern and innovative industrial economies, and diverse, resilient, and market-based supply chains are essential for our economic and national security." "To this end," the US and the EU said they "have established this Action Plan with a view to developing a plurilateral trade initiative with like-minded partners on trade in critical minerals which would support the objective of securing mutual supply chain resilience for critical minerals." Although several countries are being discussed as like-minded partners, the full list has yet to be announced. ACTION PLAN To ensure the exclusive nature of the new pact, the US and the EU stated: "The Participants intend to expeditiously implement the following Action Plan: * The Participants intend to discuss the feasibility and development of coordinated trade policies and mechanisms, including market and trade measures based on reference prices, such as border-adjusted price floors, standards-based markets, price gap subsidies, or offtake-agreements, focusing in the first instance on mutually agreed select critical minerals and associated supply chains. * The Participants intend to further explore how such measures may be embodied in a plurilateral agreement on trade in critical minerals. The Participants intend to also consider any other provisions that would be necessary to ensure supply chain resilience. Such other provisions may include, but would not be limited to: * Trade measures to support a resilient critical minerals marketplace among the contracting parties; * Standards for mining, processing, recycling, or trade in critical minerals; * Technical and regulatory cooperation; * Investment promotion and screening cooperation; * Coordinated rapid responses to prevent disruptions and crises in critical minerals supply chains, including from third countries; * Research and development cooperation on critical minerals technologies; and * Stockpiling cooperation." According to the US and EU, "this Action Plan will be implemented and developed by the Office of the United States Trade Representative (USTR) and the European Commission's Directorate-General for Trade and Economic Security (DG TRADE)." The two trans-Atlantic giants - which are preparing to announce new protectionist measures against Chinese exports of electric vehicles, batteries, and other green products - said they "also recognize that complementary discussions on critical minerals resilience continue in other fora, such as the G7." Notably, the US did not announce the tough conditions that it appears to have set out in the proposed pact. According to a Financial Times report of 22 April, the so-called members of "the coalition of the willing" will be required to pay what is called a "national security premium" for minerals sourced from member countries, including the EU. The FT report stated that the US wants coalition members to trade minerals at set minimum prices to protect their investments in mining and processing. Such a condition is aimed at targeting outside producers like China with high tariffs or other barriers to prevent them from driving down prices. According to the FT report, the USTR told allies: "There is a premium we pay, and I call [it] the national security premium, and we will all pay a national security premium to have a secure supply chain." CHINA OPPOSES "SMALL-CIRCLE" RULES Prior to the unveiling of the US-EU pact on critical raw minerals, China on 14 March underscored the need for all parties to play a constructive role in safeguarding the stability and security of global critical minerals supply chains and expressed opposition to undermining the international economic and trade order through "small- circle" rules, according to a Global Times report. When asked about a reported plan for a trade agreement between the US, Japan, and the EU on critical minerals, a Chinese foreign ministry spokesperson said: "An open and inclusive international trade environment beneficial to all serves the common interests of all countries. All parties have the responsibility to play a constructive role in keeping global industrial and supply chains on critical minerals stable and secure." "We oppose countries using rules of small groupings to undermine the international economic and trade order," the spokesperson said. "Their wish is that a price floor would guarantee suppliers a minimum return, allowing them to cover costs and sustain production amid global competition. However, such mechanisms do little to improve suppliers' underlying capacity or technological capabilities," said a Chinese trade analyst. Industry observers said that amid the lingering crisis of trust triggered by US unilateralism, the actual outcome of this US-led agreement would be "super low." Deepening divisions could further disrupt supply chains and leave all parties "paying a heavy price," while mechanisms such as tariffs or price floors would not fundamentally enhance production capacity or technological capabilities, they added. +
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