As the European Commission prefers to promote battery production inside the EU, it is locking in lower priced exports of Chilean lithium through the updating of its 20-year-old trade agreement with Chile.

The Australian government introduced tax offsets to incentivize chemical processing and battery cell production for export tariff-free under its free trade agreements, for example to the United States, thereby setting itself up to compete with China’s battery exports.

The lithium market is dynamic and changing as companies and governments shore up the reliability of their sourcing. Trade policies play a key role in shaping the market and will become more important as the next generation of lithium batteries comes online.

Cobalt is a key ingredient in lithium-ion batteries, but its extraction is concentrated in a single country: Democratic Republic of Congo. Concerned about the reliability of supply from Congo, researchers around the world have accelerated the development of future battery chemistries that minimize or even replace cobalt altogether.[13] Cobalt-free lithium batteries and other forms of lithium-metal batteries are likely to underpin even higher demand for lithium resources, providing more impetus for countries to invest in domestic production and diversify away from reliance on China.

Lithium is enabling countries to accelerate efforts to electrify their transportation sectors and work toward their green energy goals. The question is whether trade policies will become more restrictive or whether governments will agree that removing barriers to trade is the best way to assure supply.

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[1] - National Geographic, February 2019

[2] - U.S. Geological Survey, Mineral Commodity Summaries, January 2021

[3] - Ibid

[4] - Ibid

[5] - S&P Global Market Intelligence, Data compiled March 2021

[6] - United States-Mexico-Canada Agreement, Chapter 4 Rules of Origin, Appendix Provisions Related to the Product-Specific Rules of Origin for Automotive Goods accessible at ustr.gov

[7] - https://www.xinbailaw.com/en/insights-and-publications/foreign-ownership-restriction-on-electric-vehicle-power-battery.pdf

[8] - U.S. International Trade Commission, Global Value Chains: Lithium in Lithium-ion Batteries for Electric Vehicles. https://www.usitc.gov/publications/332/working_papers/no_id_069_gvc_lithium-ion_batteries_electric_vehicles_final_compliant.pdf

[9] - Ibid

[10] - Ibid

[11] - Ibid

[12] - Driving Demand: Assessing the impacts and opportunities of the electric vehicle revolution on cobalt and lithium raw material production and trade, International Institute for Sustainable Development report July 2021. https://www.iisd.org/publications/electric-vehicle-cobalt-lithium-production-trade

[13] Ibid