Leveraging EU Free Trade Agreements to advance responsible and resilient raw materials trade

As the European Union (EU) pursues its green transition, it faces a major trade policy dilemma. The green transition will dramatically increase demand for raw materials (RMs), including rare earths and lithium, which are indispensable for renewable energy and clean technologies. At the same time, expanding access to RMs risks exacerbating deforestation, human rights violations, and negative development implications for resource-rich countries. This report examines energy and raw materials (ERM) and trade and sustainable development (TSD) chapters in ten EU Free Trade Agreements (FTAs) to assess whether the EU’s approach balances securing access to raw materials (RMs) for the green transition with sustainability considerations relevant to mining, and green industrial policy objectives in the resource-rich countries.

In the context of these objectives, the report reveals an imbalance in ERM chapters of EU FTAs. Provisions that seek to secure supply of RMs and energy and create predictability for investors tend to set out clear, binding, and enforceable obligations. However, provisions promoting green industrialization in resource-rich countries or advancing sustainability tend to be aspirational and fall short of establishing clear rights or obligations. Most sustainability provisions in ERM chapters focus on the environment, with less emphasis on social sustainability and economic development. The report then examines whether TSD chapters could fill this “sustainability gap”.

While the TSD provisions go much beyond sustainability provisions in ERM chapters, they are insufficiently specific to meaningfully rebalance the ERM chapters and are typically not subject to dispute settlement. Further imbalances are observed within the TSD chapters that contain strong emphasis on environmental concerns, lesser emphasis on economic sustainability, and minimal attention to social responsibility. Consequently, TSD chapters would not fully address the sustainability gap observed in ERM chapters.

In this context, the report underscores the necessity of balancing the conditions needed to secure access to RM and energy with sustainability objectives. It recommends enhancing and including additional sustainability and green growth provisions within the ERM chapters. It also calls for a redesign of ERM chapters to incorporate more exceptions and carve-outs related to economic, social, and environmental sustainability, and to establish binding and enforceable obligations covering key sustainability issues in energy and mining projects. Specific policy options outlined in the Report include promoting green industrialization through tailored value-addition carve-outs; broadening the scope of and strengthening sustainability obligations, such as those pertaining to environmental impact assessments and involvement of civil society; strengthening pre-approval provisions for mining and energy projects; reducing tariff and non-tariff barriers; providing technical and financial assistance; and ensuring inclusive stakeholder participation. However, it also cautions that the stringency of sustainability requirements should not inadvertently discourage resource-rich countries from supplying raw materials and energy to the EU, especially in the context of geopolitical competition for resources. Thus, the need for technical and financial assistance is at the core of achieving the balance between access, development and sustainability.

On 26 June, Sunayana Sasmal (Legal Consultant at Tulip) presented the findings of the Report at T&E’s event “Re-Volt: how smart industrial policy can power Europe’s green battery value chain” in Brussels, an event featuring representatives from government, industry and think tanks.