Projects for the transition towards electromobility need two essential factors: a very significant amount of money, to grant subsidies for the purchase of new vehicles and development of charging infrastructure, and the availability of a set of inputs called “ critical materials. Lithium, graphite, manganese, nickel and cobalt, for example, are critical materials for the production of electric vehicles.
Critical materials are also central to a number of emerging technologies, such as solar panels, but it’s not uncommon to also find them in products we commonly see in our homes, such as appliances and computers. In some cases the availability of these materials is reduced and is concentrated in very few geographical points – hence their “critical” nature.
In principle, it sounds desirable for a country to seek to ensure a stable and constant supply of critical materials. The problem is when that objective is achieved through trade protectionism, or through policies that make these materials more expensive for other countries.
In Washington it is already commonplace to argue that access to these critical materials must be guaranteed in order to win the race for world technological leadership from China. To this end, the Biden administration has promoted a series of legislative initiatives, which seek to guarantee the control and use by the US of said critical materials.
The European Union and Japan, traditional partners of the US, have resented this type of proposal. Specifically, these countries are concerned about the provisions that impose obligations for the use of critical materials in the production of electric vehicles as a requirement to access the subsidies contemplated in laws such as the Inflation Reduction Act.
Trying to avoid a new trade war, the US is negotiating specific solutions for each partner. For example, an agreement was recently reached between the US and Japan to facilitate trade and promote market conditions in the trade of critical minerals.
It is necessary to comment that Mexico is already contemplated as a strategic partner of the US in these actions, since our country was explicitly incorporated into the legislation as a potential place for investment and production of these vehicles. In fact, a possible violation of the T-MEC agreements caused US legislation to modify access to subsidies for cars exclusively manufactured in the US for all those coming from the North American region.
Regardless of this, attention and interest in these critical materials has also increased in Mexico, especially in relation to their extraction and commercialization. The reforms that nationalized lithium in 2022, as well as the creation of a parastatal company in charge of exploiting this mineral – LitioMx – are the best example of this renewed interest. It will be necessary to closely follow the recent initiative promoted by the Executive to modify the Mining Law, which explicitly seeks to grant the State a much more leading role in mining activity.
Although the initiative may have other effects of which we will speak in a future installment, the bottom line is that Mexico seems to be reading the signals regarding critical materials, despite the fact that it is still uncertain if the Mexican state currently has the capacity technical and economic to exclusively assume the promotion of these opportunities, which in any case must also be done according to our international trade treaties.
The key to being able to execute successful public policies in this area worldwide will depend on an adequate combination of long-term objectives with immediate actions. If the long-term objective is to promote a new industrial revolution, based on the energy transition and new technologies (with which it is difficult to disagree, given the effects of climate change), the implementation actions of said policies must be be as inclusive as possible, allowing the participation of other governments and companies from other countries.
If, on the contrary, the policies promoted in terms of access and exploitation of critical materials have geopolitical objectives or commercial protectionism, the world may be creating the conditions for future confrontations – commercial and economic, surely, but without ruling out a fateful military conflict. .
Twitter: @JCBakerMX
