The European Commission is preparing plans that would see European firms build infrastructure in metal-rich African nations in exchange for access to key raw materials there, marking the EU’s latest effort to counter China’s dominance on the continent.
Background
In November 2008, the European Commission launched a Raw Materials Initiative aimed at facilitating companies’ access to raw materials both from within and outside the EU. The strategy also aimed at increasing resources from recycling – so-called ‘urban mining’.
In November 2009, the Commission set up an expert group which began screening a list of thirty-nine “potentially critical” raw materials whose availability to industry could come under threat as global competition for natural resources intensifies.
Six months later, the group came up with a list of 14 raw materials considered critical for the EU economy which are difficult to acquire, including tungsten, tantalum, cobalt, magnesium, graphite and rare earths.
Besides these, the EU is finding it increasingly difficult to access other raw materials as a consequence of increased demand and lower supply, also due to unfair trade barriers raised by competitors.
“The Chinese build bridges for us while Europeans observe our elections,” Africans often say when asked about foreign aid.
But this saying might change when the EU publishes its new strategy on raw materials, which Industry Commissioner Antonio Tajani plans to issue by the end of January.
The draft strategy, seen by EurActiv, underlines that the EU could get involved in directly funding infrastructure-building in Africa.
“The European Commission and the European Investment Bank (EIB), in co-operation with African countries, could assess the potential of promoting the most appropriate infrastructure that can contribute to the development of these countries and facilitate raw materials supply,” reads the paper.
This new approach is not meant to replicate the Chinese strategy, which has often been criticised in Europe for neglecting environmental and human rights concerns.
“Our approach would combine the Chinese focus on infrastructure with our traditional aid policy linked to governance developments,” an official close to Tajani told EurActiv.
Better governance in African countries is considered “essential for harnessing the benefits of mining, for both investors and civil society,” underlines the draft paper.
The EU’s dialogue with Africa took a further step at the last EU-Africa Summit, which ended yesterday (30 November) in Libya. A common strategy on raw materials was listed as part of an EU-Africa action plan for the coming years, according to Commission officials.
Dealing with China
The EU’s draft raw material strategy is rich in assertive statements to counter Beijing’s alleged unfair practices in accessing key minerals.
China’s impressive growth has turned it into the biggest consumer of metals in the world, lowering accessible resources and increasing prices for European firms.
But China is getting on Europe’s nerves primarily by preventing EU firms from accessing its own resources, especially rare earths.
In a trade strategy presented at the beginning of November, Trade Commissioner Karel De Gucht threatened action against countries preventing EU firms from accessing key raw materials.
In June 2009, the EU, the US and Mexico complained about Chinese export restrictions on rare earths at the World Trade Organisation (WTO). A dispute settlement panel was set up in early 2010 to address the case.
China is responsible for 97% of global rare earth production. Rare earths are essential for manufacturing superconductors or electric car batteries. Beijing’s share of world output stands between 70% and 90% for antimony, graphite, magnesium and tungsten, which are all considered critical by the EU.
But the European Parliament’s rapporteur on raw materials, German Green MEP Reinhard Bütikofer, believes the EU is misguided in its policy. “Instead of threatening China with legal disputes of uncertain outcome, we should rather offer the Chinese the green technologies they need in exchange for easier access to their resources,” Bütikofer pointed out during a press briefing yesterday (30 November).
“It is an important contribution which we will take into consideration, although we should not forget that by providing our technology to China we risk losing our competitive advantage in the green economy,” replied an official close to Tajani when asked to respond to Bütikofer’s comments.
Stockpiling
Whatever strategy the EU adopts to face up to Chinese competition, the draft strategy underlines the importance of developing internal mining capacities within Europe while respecting environment obligations.
Creating stockpiles of key minerals is also considered an option. So far the EU only has reserves to deal with potential shortages of oil. The US, Japan and South Korea hold stocks of other minerals, although mainly for military rather than economic reasons.
“The Commission is ready to examine with member states and industry the desirability, feasibility and added value of a possible stockpiling programme of raw materials,” reads the draft text.
‘Urban mining’ and recycling exports
The raw material strategy also underlines the importance of “urban mining” – in other words the reuse of raw materials contained in waste. “In 41 mobile phones there is the same amount of gold as in a ton of gold ore,” said Bütikofer, mentioning a UN study.
Recycling can therefore represent a mine of resources for EU industries, but many problems need to be addressed, such as “leakage through illegal environmental dumping of waste, obstacles to the functioning of the internal recycling market and inadequate innovation in recycling,” Bütikofer said.
To address the issue, the Commission says it will present “a legislative proposal in 2011 to define precise and workable inspection standards for waste across the EU”.
In order to encourage the reuse of recycled materials, Brussels is also considering “applying a certification approach to the export of waste streams” to increase guarantees on the reuse of recycled products.
Bütikofer says current EU commitments on waste export certification are insufficient to ensure correct reuse of materials once they are sent abroad. “The risk of raising standards too high is that we will not be able to sell our recycled products anymore,” warned a Commission official.