The Raw Materials Week 2024 organized by the European Commission provides us the opportunity to discuss about raw materials and the role of CETA.

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by Paolo Quattrocchi and Marco Castriani
 

CETA entered into force in 2017, but negotiations had actually started in 2009. If we calculate the time that has elapsed, due to technological innovations in recent years, it is easy to see how the agreement cannot cover and regulate many of today's global challenges. Prominent among these is economic security related to the sustainable supply of raw materials, a crucial aspect closely interlinked with both the digital and energy transition.

Understanding the importance of the supply of critical raw materials is crucial for shaping the global economic and technological future, linked to digital and energy transition processes. These processes, which are increasingly on the international political agendas, require constant and secure access to certain minerals and resources. Only in this way will it be possible to achieve both the strategic digital goals and the ambitious climate goals of the transition to renewable energy and a greener economy. This interconnection highlights the need for a comprehensive strategy for the European Union to ensure a sustainable and resilient supply while limiting the geopolitical, economic and environmental risks caused by over-dependence on a small number of suppliers. These themes were not chosen arbitrarily for this analysis, but are the priorities that recently emerged during the November 2023 Canada-EU Summit in St. John's, Canada. In addition to emphasizing the strong ties underpinning cooperation, Canada and the EU also identified new areas of collaboration such as the creation of a Green Alliance and the launch of a Digital Partnership. At the end of the summit, a joint declaration also established Canada's entry into the Pillar II Horizon Europe programmes, the European Union's research and innovation programme.[1]

The Italian government, through new policies, is also striving for a renewal of raw materials and mining strategies. The objective is to diversify supply sources and bring them up to European standards, through a review of national strategies and the search for new partnerships, including the crucial one with Canada.

GLOBAL CHALLENGES AND THE EUROPEAN UNION STRATEGIES

The European Union is heavily dependent on imports of essential critical raw materials from third countries, a vulnerability made even more evident by the increase in global demand. According to the International Energy Agency (IEA), demand for these resources could increase by up to 40 times in the next 20 years[2] and, in order to achieve net-zero targets by 2050, six times more mining will be required than today.[3]

These materials are crucial for strategic sectors, such as battery production (lithium, cobalt, nickel), solar panels (gallium), wind technologies (raw boron), and for the space and defence sectors (titanium and tungsten). Moreover, according to the recent conference organised at Canada's representation in Brussels in December 2024, the global distribution of these critical raw materials is concentrated in a limited number of countries:

• China supplies up to 100% of rare earths to the EU and dominates the global market;
• The Democratic Republic of Congo is the main supplier of cobalt;
• Indonesia is the main supplier of nickel;
• Chile holds significant reserves of lithium and copper.

The current geopolitical situation, also following the war in Ukraine, has further highlighted the need to reduce energy and mining dependence on Russia and China. Even the President of the European Commission recently reiterated the importance of diversifying supply sources and reducing dependence on China.[4]

The importance of critical raw materials for the EU's economic growth and strategic security, especially in the areas of defense, renewable energy and digital transition, is therefore increasingly evident.

To address these challenges, the EU has outlined its strategy through the European Critical Raw  Materials Act adopted in May 2024. The initiative aims to ensure a safe and sustainable supply and reduce dependence on individual supplier countries. The main objectives include:

• strengthening capabilities at all stages of the supply chain;
• reduce dependence on third countries by diversifying sources of supply;
• promote sustainability in supply chains;
• increase European production autonomy by enhancing national extraction, processing and recycling.

Another EU idea to improve the resilience of supply chains is the creation of a Critical Raw Materials Club, which would include trusted partners, including Canada. [5]

A strategic move was the EU's participation in the Mineral Security Partnership (MSP), a multilateral initiative launched in 2022 by the United States. The objective of the MSP is to strengthen the global security of critical raw materials supply chains by promoting strategic investments and diversification of sources.

CANADA AS AN IDEAL STRATEGIC PARTNER

In recent years, EU-Canada cooperation on raw materials has been significantly strengthened and is one of the most advanced and strategic at the global level, especially thanks to the Canada-EU Strategic Partnership on Raw Materials of 2021.

Canada emerges as an ideal strategic partner for the EU. Endowed with abundant natural resources and a stable and transparent regulatory framework, Canada shares fundamental values with the EU such as democracy, sustainability and respect for human rights.

As evidence of Canada's concrete commitment to these issues, at the COP15 in Montréal in 2022, the country promoted the creation of the Sustainable Critical Minerals Alliance (SCMA), together with Australia, France, Germany, Japan, the United Kingdom and the United States. In June 2024, Sweden also joined the Alliance, further consolidating this global commitment. The SCMA is closely aligned with the goals of the G7 2030 Nature Compact, which aims to halt biodiversity loss by 2030 through a systemic reduction of greenhouse gas emissions.[6] The aim of the Alliance is to promote the global adoption of environmentally sustainable and socially inclusive mining, processing and recycling practices and responsible supply chains for critical minerals.[7] This initiative further demonstrates Canada's leadership in promoting a model of international cooperation that combines supply chain security with environmental and social responsibility.

In terms of its extraordinary wealth of natural resources, Canada is among the world's top ten producers of lithium, cobalt, copper and nickel. In addition, the country is a global leader in the production of uranium, potassium, aluminum, metallurgical coal and copper, boasting the availability of 34 critical minerals considered essential for the energy and digital transition.

For the EU, the advantages of cooperation with Canada are manifold:

• economic and political stability;
• high ESG standards: Canada's mining tradition is distinguished by its commitment to sustainability, supported by the Mining Association of Canada's (MAC) Towards Sustainable Mining (TSM) a program, which aims to continuously improve environmental and social practices in the industry, making them among the most advanced in the world;
• the collaboration established through the Strategic Partnership on Raw Materials in 2021.

On the Canadian side, despite the abundance of natural resources, the country needs capital to fully exploit them, especially after the loss of some Chinese funding, which has created a significant gap in mining investment. To fill this gap, the Canadian government needs to promote mutual collaboration through initiatives such as the MSP and incentivize the entry of private investment.

In this scenario, CETA represents the ideal platform to promote more secure and sustainable supply chains between Canada and the EU. Despite the existence of a bilateral commodity dialogue forum that is updated annually, ratification and the possibility to complement CETA with new commodity regulations would help to ensure more concrete EU strategies and initiatives towards Canada, also with a global perspective.

ITALY-CANADA COLLABORATION: ECONOMIC, TECHNOLOGICAL AND GEOPOLITICAL ADVANTAGES

Italy and Canada recently adopted the Roadmap for Enhanced Cooperation, a strategic agreement that strengthens cooperation between the two countries at the G7 summit in Puglia in June 2024. Further consolidating the bilateral relationship was the Joint Declaration on Critical Raw Materials, Energy Security and Sustainable Transition on 10 October 2024.

Thanks to these recent collaborations, although the Italian Parliament has not yet ratified CETA, our government is working concretely on the issue of raw materials, fostering a close dialogue with the Canadian government through bilateral agreements that guarantee security and sustainability in the supply of critical raw materials.

In addition to bilateral dialogues, the Italian government is trying to keep up with changes in the raw materials sector, also through some unilateral initiatives, including the 'Critical Raw Materials Decree', approved by the Council of Ministers in June 2024. The decree aims to bring the national mining regulation in line with the European standards of the Critical Raw Materials Act. The objectives of the decree, for a national raw materials policy, are:

• promote the digital and green transition;
• ensure security in the supply chain;
• respect environmental principles.[8]

The 'Critical Raw Materials DL' is a concrete demonstration of the Italian government's willingness to review policies on the mining sector, bringing them in line with European and global developments.

This development could create a new space for the development of economic and trade relations between Italy and Canada, with the aim of fostering a beneficial interconnection. On the one hand, Canadian companies, with high skills in the sector, could be incentivized to invest in the mining sector in Italy; on the other hand, Italian companies could become part of the supply chain, offering technologies and other products or services.

An opportunity to forge partnerships in this sector is the PDAC (Prospectors & Developers Association of Canada) Convention in Toronto, a major annual event for the global mining industry to be held in March 2025. The event deserves a mention because it provides a relevant platform for companies to explore new markets and share knowledge on sustainability and emerging technologies.

RATIFYING AND REVISING THE CETA TO MAXIMISE THE BENEFITS OF COLLABORATION

According to EU rules, if a member country informs Brussels that it does not want to ratify CETA, 'provisional application must and will be terminated'. However, since the European Commission would then have to draft a proposal to be adopted by qualified majority, i.e. at least 15 member states representing 65% of the EU population, in order to end the provisional application of the agreement, the risk of a collapse of the agreement is rather remote, and this is even more true if one considers the will of the majority of European states.[9]

It is clear, however, that CETA cannot be applied provisionally forever. Failure to ratify in the long term would entail the risk of losing the benefits of the agreement, not only in terms of long-term stability and cooperation, but also with regard to intellectual property.

Furthermore, the non-ratification of CETA is bound to result in a lack of specific regulations and controls that are fundamental to the issues described. From the perspective of the EU and its member states, it would mean a potential loss of growth in the security of raw material supply chains, which would entail considerable economic and geopolitical impacts.

Italy has not yet ratified CETA, mainly due to concerns about the agri-food sector, but without an objective assessment of the considerable and undeniable benefits that CETA brings, as demonstrated by all indicators.

It is to be hoped that, in light of the results, the intensity and the relevance of the EU/Italy-Canada strategic partnership, the Italian Parliament will be able to bring the ratification debate to a positive conclusion with serenity, conviction and farsightedness in the near future