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Africa Confidential, October 2023

China, Europe and the US mull tariff war amid scramble for Africa's green minerals
Corporate rivalries and geopolitical tensions disrupt markets for electric vehicles | By Tim Concannon

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'We are seeing the biggest change and transformation in our societies since the invention of the steam engine,' Nicola Beer, MP at the European parliament

A trade war is brewing between the European Union and China over electrical vehicles (EV) but the fight is about far bigger issues than cheap imports to Europe.

At stake is the balance of industrial and geopolitical power in the competition to dominate the global market for 'green' technologies such as electric cars, wind and solar power generation and light rail.

Some say it's the 'Great Game' of this century after the 19th century competition between Britain, Russia and others for control of the 'High Pamirs' and the major trade routes in Central Asia.

This contest may undermine the negotiations at the UN COP28 Climate summit in Dubai on 30 November-12 December (AC Vol 64 No 3, Finance and energy access come first). These talks are already overshadowed by conflicts over Ukraine and Taiwan's status. The ripples of this rivalry between China and the Eurozone will be felt in Africa because the key components in this new scramble for industrial materials come mainly from its mines. And African states are trying to coordinate to protect their economic interests ahead of COP28 (AC Vol 64 No 18, Nairobi vies for green capital status).

Making her state of the union address on 13 September, President of the European Commission Ursula von der Leyen championed Europe's 'Green New Deal' to achieve net zero by 2050 but criticised Chinese EV manufacturers, announcing an investigation into Beijing's state subsidy of the industry. This looks like the opening shots in a fight over the tariffs imposed by the EU and China on each another's exports (AC Vol 62 No 4, Green tax blow to Africa).

'Global markets are now flooded with cheaper electric cars… their price is kept artificially low by huge state subsidies,' Von der Leyen told the European parliament.

The EU Commission has set a 13 month limit to evaluate whether the zone should introduce punitive tariffs above the usual 10% EU rate for imported cars. Beijing's Trade Ministry responded, claiming that the EU investigation is 'a naked protectionist act that will seriously disrupt and distort the global automotive industry and supply chain'. It added the investigation would damage its economic and trade relations with the EU.

Germany's Chancellor Olaf Scholz has expressed caution about the Chinese EV probe and warned against 'protectionism'. A similar trade war was narrowly avoided between the EU and China a decade ago over solar panels.

The recent intervention over Taiwan's status by tech mogul and producer of Tesla electric cars, Elon Musk, suggests this time the stakes are far higher. A key factor in a possible invasion of Taiwan by China is the fact that Taiwan produces 60% of the world's semiconductors and more than 90% of advanced semiconductors.

One company, Taiwan Semiconductor Manufacturing Corporation (TSMC) makes most of the world's computer chips, essential for the majority of new and green technologies, from smartphones to electric vehicles. These technologies depend on component materials produced by Africa's mining industry.

Alongside the United States' military pact with Taipei, EU-Africa relations and EU-China relations are central to the dispute about whether Taiwan is an integral part of China.

The risks of an EU-China trade war combined with dispute over Taiwan's status could lead to a 'chip shock' like the 'oil shock' of the early 1970s. It would ratchet up global inflation, adding to hikes in the cost of petrol, gas, electricity and food triggered by Russia's invasion of Ukraine.

'We're in geopolitically stormy waters,' German MEP Nicola Beer said in the EU Parliament debate about the Critical Raw Materials' Act which aims to secure economies in the bloc to secure a supply of natural raw materials to enable it to meet its 2030 carbon reduction targets.

China isn't the only Asian EV manufacturer joining the 'Green Great Game'. South Korean battery manufacturers expect to benefit from an EU-China trade war. Hyundai Motor Group is hiring top Korean former diplomats such as Kim Il-bum, the former presidential protocol secretary, as the head of its global policy office to respond to laws to secure Critical Raw Materials for the west's biggest economies.

Western economies have compiled lists of the critical minerals needed to build EVs, batteries, turbines and solar farms. They have enacted laws and agreements to secure them over the longer term.

These are the US's Inflation Reduction Act (IRA), the European Critical Raw Materials Act (CRMA), and the United States-Australia Climate, Critical Minerals and Clean Energy Transformation Compact, which was announced on the fringes of the G20 summit in Japan in 2019. Saudi Arabia has joined the trend with a nickel mining deal in Brazil.

The development of the electric car market across the EU is inconsistent. Norway is close to eliminating the internal combustion engine while other member states such as Italy, are far behind. In Britain, Prime Minister Rishi Sunak has caved in to pressure from the right wing of his cabinet to delay a 2030 phaseout of new petrol cars, which chief executive of the Society of Motor Manufacturers and Traders (SMMT) Mike Hawes, has called 'confusing'.

These patchy responses has led business leaders such as BMW's chief executive Oliver Zipse to question whether the EU can meet its own 2035 target to phase out petrol engines.

European electric car manufacturers worry about this slow and uneven adoption of the new technology across the Eurozone, plus the fluctuation in prices of raw components and the risks  of higher inflation. Their market share is also threatened by the growing popularity of Chinese-made electric cars such as the Neo EV range that are far cheaper than those of their European competitors. French and German car-makers have been fretting about this price disparity for some months. That explains Von der Leyen's tough line on Chinese exports.

African mining communities would be hit quickly by a trade war between the EU and China over electric vehicles (AC Vol 63 No 25). The share price of the top Chinese EV companies dropped from between 8% - 17% following Von der Leyen's announcement of an EU investigation.

This will slow demand for raw minerals if the dispute gets worse. Estimates have been swirling around the mining and EV industries this year of a 20-40-fold increase in global demand for 30 or so key materials by 2050 (AC Vol 63 No 25, Lithium scramble offers temptation).

Some of the provisions of the EU critical raw material laws could make companies legally accountable for the environmental and human rights impacts of mining and allied industries. This worries the US Treasury and its business leaders as well as Japanese companies and others planning to export electric vehicles and other 'green tech' to the EU.

Expectations of a raw materials 'gold rush' could be dampened in 2024 if the tariff battles get worse. This might help Africa in the short term. Recent reports by Amnesty International have shown how expansion of mining operations has caused people in Congo-Kinshasa to be forced off their land.

The EU plan is to source around 80% of the main elements in the green revolution internally. But this has prompted protests at land clearances for the mining of critical raw materials in Ireland, Portugal and Sweden.

Of the more than 34 minerals in high demand, the most volatile prices are those of nickel sulfate, a blue-green salt mainly used for electroplating nickel and cobalt, another essential mineral for EVs and batteries.

Africa is some way down the league table of nickel producers, Indonesia is by far the biggest. South Africa has five main nickel mines in Africa. There are others in Zimbabwe, Tanzania, Madagascar, Zambia and Côte d'Ivoire. Congo-Kinshasa produced 73% of the world's cobalt in 2021; about 40% of that went to EVs. There are also cobalt mines in South Africa and Zambia.

This puts a spotlight on the Kolwezi mines in Congo-Kinshasa where campaigners have been fighting to obtain justice for locals, victims of illegal mining for many decades which warranted a full UN investigation 20 years ago.

Perhaps the new urgency of sourcing the ores from the Kolwezi mines will prompt the EU and other western economies to focus attention on the working and living conditions on the communities that are providing these vital raw materials for the world's renewable energy revolution.

This article was developed with the support of Journalismfund Europe
Journalismfund Europe