The US and Japanese governments have signed an agreement to strengthen supply chains for “essential minerals and electric vehicle batteries” and expand bilateral trade in commodities considered important to the energy transition and now dominated by China.

The agreement is expected to “facilitate exchange, promote free rather than artificial competition, and enforce strict social and business rules” for certain range products, thereby creating “safe, secure, and fair supply chains,” according to a US Trade Representative services announcement. (USTR) Katherine Tai.

The agreement concerns, in particular, such minerals as lithium, nickel, cobalt, manganese and graphite.

“Japan is one of our most important partners and this agreement will allow us to strengthen our bilateral relationship. This is an important point that demonstrates that the US continues to work with its allies and partners to strengthen supply chains and through the IRA (Inflation Reduction Act), Ms Tai continued.

This is the first step towards including batteries and electric vehicles from Japan in the list of those who will receive a $7,500 federal subsidy under an IRA approved this summer.

The law provides that “free trade agreements like this one will make goods from Japan acceptable. The Treasury Department is expected to clarify the terms by the end of the month,” a Joe Biden administration official said.

The final word rests with the Ministry of Finance, which is expected to publish a list of cars suitable for this purpose within a few days.

The agreement also covers key materials for the production of items needed for energy transmission, such as photovoltaic panels and wind turbines.

The agreement is similar to the one the European Union is hoping to sign with the US so that European producers can enjoy the same subsidies. Negotiations on it are ongoing.

The EU has expressed concern about the risk of being closed to the US market for solar panels and wind turbines.

Japan and South Korea also raised serious concerns following the adoption of the IRA, which they saw as a risk to investment in these critical sectors.

The Japanese auto industry, also “worried”, was looking forward to developments.

The head of European diplomacy, Giuseppe Borrell, recalled on March 14 that US subsidies do not comply with the rules of international trade.

The European Commissioner for Technology (her portfolio is officially titled “Digital Ready Europe”) and Commission Vice President Margrethe Vesteiger are expected to meet tomorrow Wednesday with Secretary of Commerce Gina Raimondo and on Friday with US Secretary of Commerce Janet Yellen.

Source: APE-MPE, Reuters, AFP.