The Council of the European Union has made a decision (EU) 2023/156 on July 20, 2023, to authorize the initiation of negotiations with the United States of America (US) regarding an agreement aimed at enhancing the supply chains for critical minerals. The decision is based on the Treaty on the Functioning of the European Union, particularly Article 207(4) in conjunction with Article 218(3) and (4).
The European Union and the US have a strong trade and investment relationship with integrated economies. The decision stems from the US's enactment of the Inflation Reduction Act on August 16, 2022, which amends certain sections of the US Internal Revenue Code, including the 'Clean Vehicle Credit.' To address this, the EU aims to establish a targeted agreement on critical minerals. This agreement would enable critical minerals extracted or processed in the EU to contribute toward fulfilling the requirements of the Clean Vehicle Credit, in the absence of a comprehensive free trade agreement between the EU and the US.
The agreement's focus is on fostering the supply chains for critical minerals needed in the production of electric vehicle batteries. Beyond this, it is viewed as a step toward enhancing the economic relationship between the EU and the US.
The decision authorizes the European Commission to commence negotiations with the US to create an agreement that strengthens supply chains for critical minerals.