The EU joins the China-US agreement on rare earths and gains a year of time | International

The European Union joins the agreement that the United States and China reached this week to reduce restrictions on the export of rare earths and technology from the Asian giant, which threatened to strangle value chains around the world. “The EU welcomes China’s suspension, for 12 months, of the relevant export controls,” sources from the European Commission said early this Saturday, after a technical meeting between the two parties held until the last minute on Friday. However, the conflict opened by the company remains in the air.

and economic security experienced a new chapter this past October, when China—the world leader in the production of rare earths, key minerals for technological development—announced that it was going to restrict the export of these raw materials as of December 1. To reduce tension and seek a solution, China and the EU have intensified their contacts in the last week. The Commissioner for Commerce, Maros Sefcovic, agreed with his counterpart Wang Wentao on meetings between technicians from both sides that have ended with a result that is similar – at least with regard to rare earths – to the recent pact reached in Korea between the presidents of China, Xi Jinping, and the presidents of the United States, Donald Trump.

The lack of European independence speaks clearly that Trump already came last Thursday to say that it had been his negotiation that had achieved this extension on the export licenses for Chinese rare earths. “All [el asunto] of rare earths has been solved […] And that is for the world,” he said. Requiring export licenses for all products that had more than 0.1% of rare earths coming from China or using its economy was a ring on the value chains of a multitude of industrial sectors.

The decision announced on October 9 by Beijing outraged Brussels and encouraged those who have a more hostile position towards the Asian giant because, as several voices from the institutions and private sectors in the community capital emphasize, “it has never been done before.” The truth is that China had done it before, in 2014, but on a much smaller scale. And, as some admit, the United States has also done it in the past, but always in a very focused way or as a result of sanctions against countries like Iran or Venezuela.

Among the most angry is the president of the European Commission, Ursula von der Leyen, who days ago took a harsh shot at the Asian giant before an audience of German businessmen: “When China joined the World Trade Organization, most of us expected low tariffs, shared security and prosperity. […]. But the cooperative world order of 25 years ago is being replaced by a conflictive world economy. The theft of technologies, hostile investments, export controls, subsidies… All of this is no longer an exception, but rather tools of taxation and competition.”

The German then used an expression that she also used during the trade war with the United States this summer: “We are ready to use all our instruments to respond if necessary.” But the truth is that none of this was used against Washington and several sources from different European institutions believe that now it would not be easy to form the cohesion necessary to respond with restrictive measures.

Given this, and also because the escalation would probably be uneven, the European employers’ association Business Europe trusts in “a short-term alternative.” “China has a very significant role in value chains and is using that power to control the market and exert political and economic pressure,” explained Luisa Franco, vice general director of Business Europe, to this newspaper at the beginning of the week. The role this Portuguese executive is talking about refers to the fact that China exercises overwhelming control of rare earths – a series of key raw materials in military, medical, electronic or automotive technology – which leads it to control percentages of 90% of what moves in markets around the world after having been refined.

The rare earths conflict, which as Trump said affected the entire world, is not the only front. There is the open fight over Nexperia, a company with Chinese capital but based in the Netherlands. This important chip manufacturing company in the automotive sector was intervened by the Dutch authorities on suspicion that its owners were depriving it of intellectual property rights, among other things. But this company controls 70% of a specific type of semiconductors that are used in the manufacture of cars and, in response to the Dutch decision, froze exports to Europe.

“The situation becomes more critical every day for global automobile manufacturing,” ACEA, the European automobile association, warned on Wednesday. “The industry is currently using reserves, but supplies are running out quickly. In a survey of our members this week, some are already predicting imminent stoppages on assembly lines.”

To address this problem, this Friday the Vice President of the Commission, responsible for Technological Sovereignty, Henna Virkkunen, met with the interim managers of Nexperia. At the same time, Trade Commissioner Maros Sefcovic is looking for diplomatic solutions to an issue that has shown the extent to which the EU is dependent on Chinese semiconductors, chips that are not cutting-edge, like Nvidia’s for artificial intelligence, but rather on much more conventional circuits.

China, for now, does not consider this conflict settled. In a message on the social network He had previously blamed the Hague Executive for causing this situation because “undue interference in the company’s internal affairs has caused the current disruptions in global industrial and supply chains.”

But the 12-month postponement of export restrictions is nothing more than an extension. Europe needs a structural solution and that path is not without difficulties, because China does not want to lose its position in the market and has not demonstrated, they emphasize from Brussels time and again, that it wants to correct the imbalances caused by its growth model: export capacity at very low prices built on the basis of public aid that doubtfully complies with international standards for international trade.

How to face it? European sources point out that the EU must seek solutions, “preferably negotiated”, in these temporary conflicts without losing focus on the long-term objective. For example, a few weeks ago additional tariffs were established to protect European steel due to overcapacity installed in China. Following that manual, therefore, it would not be necessary to dismantle this protection for the steel industry now to get out of this crisis but rather to look for other types of solutions or respond with countermeasures.

However, this last step is not easy, as seen during the trade war with the United States this summer. The dependence on security, especially for Eastern countries, and the fear of impossible tariffs, which weighed heavily on Germany, scared away the cohesion necessary to take this step. And something similar would also happen now if forceful measures are put on the table, several sources point out.