Europe's massive trade deal with South America is contingent on the acceptance of 'white gold'.

• On Dec. 6, the European Union and five Mercosur countries (Brazil, Argentina, Paraguay, Uruguay, and Bolivia) finally reached a highly anticipated trade agreement after 25 years of talks.
• European agriculture could face unfair competition as a result of the deal, and France and Poland have voiced their opposition.
• Despite its importance to Europe's economic future, the significance of critical raw materials like lithium is receiving less attention in the coverage of the free trade agreement.

The significance of lithium in the European Union's agreement with Brazil, Argentina, and three other South American countries is likely to have been a significant factor, according to analysts.

On Dec. 6, the EU and five Mercosur countries, including Paraguay, Uruguay, and Bolivia, finally reached a highly anticipated trade agreement after 25 years of talks.

The EU-Mercosur partnership, if ratified by the 27-nation bloc, will establish one of the world's largest free trade zones, encompassing an estimated population of over 700 million and accounting for approximately 20% of global GDP.

The European Commission, the EU's executive body, stated that the trade deal aims to boost bilateral trade and investment, reduce tariffs and non-tariff trade barriers, establish more stable regulations, and promote shared values, including sustainable development.

While some are in favor of the agreement, others, including France and Poland, are opposed to it, stating that it may lead to unfair competition for European agriculture.

Despite its importance to Europe's economic future, the significance of critical raw materials like lithium is receiving less attention in the coverage of the free trade agreement.

According to ING analysts, it is surprising that the EU is so dependent on China for critical raw materials, given that countries like Argentina, Bolivia, and Brazil hold large reserves of these materials and EU demand for these materials is expected to increase significantly.

The EU [Commission] recognized the strategic importance of having better access to materials through closer ties with Mercosur, even though it may be challenging to quantify the exact economic value of this element.

Lithium, often referred to as "white gold" due to its light color and high market value, is considered a vital element in the transition away from fossil fuels. It is commonly utilized in electric vehicles, cellphones, and rechargeable batteries for laptops.

Lithium reserves in Latin America are estimated to account for more than half of the world's total, with Chile and Argentina being the top producers.

Lithium 'essential for key industries'

Ursula von der Leyen, President of the European Commission, characterized the EU-Mercosur trade deal as a "win-win agreement" that can reduce EU companies' export duties by 4 billion euros ($4.24 billion) annually.

Kallas emphasized the significance of obtaining critical raw materials in her statement regarding the trade agreement.

Kallas stated on Friday that for Europeans, the opening of this region allows for free trade and access to essential raw materials, while reducing the risk of competitors taking our place if we are absent.

After 25 years of stalled negotiations, a deal was finally reached, according to Federico Steinberg, a visiting fellow with the Europe, Russia, and Eurasia program at the Center for Strategic and International Studies.

The rise of protectionism, as exemplified by Donald Trump's reelection, was a significant factor in the ongoing concerns regarding the rapid expansion of Chinese trade and investment in Latin America.

According to the agreement, Steinberg stated that European firms would probably have better access to public procurement markets, high-value service sectors, and critical raw materials, such as lithium.

The European Union will lower tariffs on agricultural products and other goods and contribute EUR 1.8 billion to Mercosur's green and digital transition, as stated by Steinberg in a note published on Friday.

The Federation of German Industries (BDI), which represents around 8 million workers in the industry-related service sector in Germany, warmly welcomed the EU-Mercosur trade agreement, despite some unhappiness among Europeans about the proposed terms.

The BDI stated on Dec. 6 that the EU-Mercosur trade agreement presents a significant opportunity to increase access to vital raw materials like lithium and copper, which are crucial for industries such as electromobility and renewable energy.

This trade agreement sends a clear and strategic message in support of free and rules-based trade, in the face of growing global trade fragmentation.