USTR Focuses on Need for More Ambition in Steel Talks; EU Desires Critical Minerals Deal

A readout from the Office of the U.S. Trade Representative after the latest round of talks between the trade representative and her EU counterpart on a steel and aluminum deal suggested she does not think the EU is thinking big enough. The U.S. and the EU are trying to agree on a system that would preference steel and aluminum made with a lower carbon footprint, and, at the same time, a system that would keep metals produced through non-market excess capacity out of their countries.

The EU expects that Section 232 tariff rate quotas on its steel will be lifted when this agreement is reached.

USTR Katherine Tai said July 20 that she stressed that both sides should be "generating ambitious proposals in order to address shared concerns on carbon intensity and non-market excess capacity in the steel and aluminum industries." She said the initiative is challenging in both the U.S. and Europe, so they will have to be committed and work with trust in each other.

"Ambassador Tai underscored that, with the October deadline approaching, the United States and European Union need to deliver a high-standard agreement worthy of the two years that both sides will have spent in negotiations," the document said.

European Commission Executive Vice President Valdis Dombrovskis did not issue a readout, but tweeted that the discussions were useful, and that they are committed to reaching a deal "by this autumn." He added: "We also hope to see quick progress in our Critical Minerals Agreement."

The critical minerals agreement Dombrovskis hopes to seal would help EU mining or processing interests have a place in the U.S. electric vehicle battery supply chain.

The European Council authorized Dombrovskis to start negotiations with the U.S. on a critical minerals agreement, the council announced July 20. The EU said the deal would "strengthen critical minerals supply chains and mitigate some of the negative repercussions of the US Inflation Reduction Act on EU industry."

The negotiating directives say the deal should include provisions on boosting supply chains; be consistent with World Trade Organization and EU Critical Raw Materials Act rules; ramp up the trade in and diversion of supply chains of critical minerals; boost high levels of "environmental protection and protection of workers" in the sector; "aim to prevent distortive and protectionist practices"; and "encourage cooperation on international standards for critical minerals lifecycle assessment, extraction, labelling, recycling and transparency."

Two days before that vote, Dombrovskis testified in front of the European Council on the fact that the EU thinks the Inflation Reduction Act, which includes those EV battery rules of origin, includes protectionist planks.

"Economically, the IRA as a whole is acting as a big stimulus to the US economy. Many EU companies can participate in this through intensive EU-US trade and investment ties. That is why many EU companies are actually positive about the IRA.

"But it also has subsidies that contain some form of local production, local content or local employment requirements, which EU companies cannot meet unless they move their business to the US.

"This may have a chilling effect on EU exports and some EU businesses will be impacted more than others.

"We need to avoid transatlantic zero-sum competition and mitigate negative effects of the IRA.

"This is why we have been working hard to find pragmatic solutions to the IRA that reduce the damage to the EU-US relationship.

"We started this work with a high-level Task Force last October, directly engaging with the White House. This achieved positive results, in that we agreed on a non-discriminatory application of electric vehicle leasing with EU companies competing on equal terms with US competitors," he said, and a critical minerals agreement would be the next step. He said: "A successful conclusion [to negotiations] would allow our mining and chemical companies to offer their products to US battery manufacturers without them risking losing out on the IRA benefits."