The European Union’s forthcoming regulations prohibiting products manufactured using forced labor have instilled optimism in EU Trade Chief Valdis Dombrovskis regarding the potential for finalizing a critical minerals agreement with the United States. The EU aims to secure a pact with Washington that would enable critical minerals mined or processed in Europe to qualify for U.S. clean vehicle tax incentives outlined in the Inflation Reduction Act (IRA).
Despite the recent conclusion of the two-day Trade and Technology Council without a finalized agreement, negotiations between the United States and the EU continue to progress. A primary sticking point revolves around commitments to labor standards, with the U.S. seeking the ability to inspect individual sites to ensure compliance.
Dombrovskis expressed confidence in the possibility of reaching a deal this year, emphasizing the shared commitment of both the EU and the U.S. to upholding labor rights and eradicating forced labor. The implementation of new EU legislation targeting forced labor is expected to facilitate discussions, aligning both legal systems to accommodate the new rules.
The EU is on track to enforce its forced labor law within the year, with the European Commission spearheading investigations into alleged forced labor outside the EU. National authorities will handle potential violations within their respective countries, with products facing withdrawal if allegations are substantiated.
The envisioned minerals deal, focusing on critical resources like cobalt, graphite, lithium, manganese, and nickel crucial for advancing digital and green economies, may not yield significant monetary gains for the EU given its limited mining and processing capabilities. Nonetheless, the agreement holds strategic importance, positioning the EU akin to Canada and Mexico within global supply chains.
An EU official emphasized that beyond monetary considerations, the deal carries symbolic weight by elevating the EU’s status and signaling to industry stakeholders about the region’s commitment to ethical supply chain practices.