Critical Minerals, FDI and North- South Trade Deals

Trade Dispute Brewing between China and the US over USA’s Inflation Reduction Act?

In a dispute that could turn out to be? of? the most consequential in the race for critical minerals, China has requested WTO dispute consultations with the United States regarding certain tax credits under the US Inflation Reduction Act to promote the production of electric vehicles and renewable energy projects. The?Inflation Reduction Act (IRA) of 2022, has come up with implementing regulations which are ?affecting incentives for international trade in EVs and their key inputs. Whereas US Treasury Department sees IRA? as “of the largest investments in the American economy, energy security, and climate that Congress has made in the nation’s history’’, its simply a subsidies legislation.

This is the basis of China’s contention,. In summary, the ?IRA establishes the Clean Vehicle Credit for qualifying electric vehicles ("EVs"). To qualify for the Clean Vehicle Credit, final assembly of the qualifying vehicle must take place in North America. The North American assembly requirement is a condition for obtaining either or both of the two components of the Clean Vehicle Credit: (1) the critical minerals component, worth $3,750 per vehicle; and (2) the battery component, worth an additional $3,750 per vehicle. To qualify for the $3,750 critical minerals component of the Clean Vehicle Credit, a percentage of the value of applicable critical minerals contained in the vehicle battery must (i) be extracted or processed in the United States; (ii) be extracted or processed in a country with which the United States has a free trade agreement; or (iii) have been recycled in North America. China contends that these provisions violate GATT as they are discriminatory.

?Foreign Direct Investment: Senegal’s Mining Contracts

Senegal’s newly elected President Bassirou Diomaye Faye has announced that the country will conduct an audit of the oil, gas and mining sectors with the aim of undertaking disclosure of the effective ownership of extractive companies (and) with an audit of the mining, oil, and gas sector. There have been interests in Senegal's natural resources sector? in recent times. For instance, Australian oil and gas company Woodside Energy is targeting first oil from the Sangomar offshore project in Senegal towards the middle of 2024.

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ACP Countries and Reparations

Do you think a Tribunal on reparations for African and the Caribbean Countries could work? This is a debate which has? apparently gained some support especially with regards to the creation of ?international tribunal on atrocities dating to the transatlantic trade of enslaved people, with the United States backing a UN?panel at the heart of the effort.

U.S. – Kenya Strategic Trade and Investment Partnership Negotiations

On 5th April 2024, the USTR released summaries of texts proposed by the U.S. side on good regulatory practices, workers’ rights and protections, and a second tranche of agriculture text , which underlines its negotiations with Kenya. The have been several negotiation rounds ?since the? launch of the STIP in 2022. These include April 2023 negotiating round, October 2023 negotiating round ?and January 2024 negotiating round. The ?just released summaries ?of texts cover agriculture, good regulatory practices , as well as workers’ rights and protections.

And still on US – Kenya trade relations ?it has been reported that ?US firms are losing out on big contracts in Kenya due to bribe requests and extortion from top government officials in what has tilted scales in favour of foreign contractors willing to pay to secure tenders. This is a key development given some of the ideas the US has been espousing in its modern day trade deals at WTO-Extra issues such as ?illicit financial flows, graft and security of supply chains.

UK- Africa Trade ?Relations

?According to a press release by the UK government, UK-African Investment Summit (UK-AIS) which seeks to promote 2-way trade and investment, creating jobs and growth and supporting women entrepreneurs ??will be held in London on 23 to 24 April 2024 and seeks to build on the results of the UK-African Investment Summit 2020 and virtual UK-African Investment Conferences in 2021 and 2022. It is noteworthy that since ?its withdrawal from the European Union in 2020, the UK ?has been negotiating its own trade deals. Some of these deals involve ?several African countries. For instance ?the SACUM-UK economic partnership agreement (EPA), UK-Tunisia association agreement, UK-Morocco association agreement, UK-Kenya Economic Partnership Agreement, UK-Ghana Interim Trade Partnership Agreement, UK-Egypt Association Agreement, agreement on trade between the UK and Eastern and Southern Africa (ESA) countries, and the UK-C?te d’Ivoire Stepping Stone Economic Partnership Agreement.

It should be interesting to conduct a deep dive on what these trade agreements mean especially the benefits they ?present to the African countries involved and also what implications the preferences under them mean for integration under the AfCFTA. David Luke has broadly discussed how UK-Africa trading relations can be renewed by underscoring seven key priorities that UK should focus on: a trade relationship with a developmental goal; pursuit of ?more trade with Africa; trade diversification; diversified trade paired with investment; support of Africa’s home-grown trade reforms and regional integration; ?aligning development assistance support with overcoming supply-side bottlenecks; and taking a pro-development position at the ?WTO. These are ideas that the AU can consider as the Summit nears.

Digital Trade

One of the most recent AfCFTA ?legal instruments adopted by the AU membership is the ?AfCFTA Digital Trade Protocol which contains what should become Africa’s digital trade rules template. However, this is the easier bit. The next stage , where the commitments will require implementation by ?AfCFTA Member States, is ?likely to be complicated. Kati Suominen in Watching the watchmen: Monitoring digital trade agreements? discusses various initial attempts to create monitoring mechanisms in digital trade agreements. Interesting examples include the ?CPTPP approach (E-commerce Committee),? the USMCA ?approaches by and Korea-Singapore Digital Partnership Agreement (information ?exchange and enforcement ), and UK- Australia FTA approach (Committee on Cooperation). Which approach does the AfCFTA take? We shall discuss this is out subsequent editions. In emphasizing the importance of enforce ment, Kati notes that? “Absent effective monitoring, agreements risk becoming paper agreements that do little to promote digital trade or support modern, data driven supply chains and production methods and use of emerging technologies such as AI.”

Thank you for reading and please share your feedback and thought

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Patrick Anam

Expert, International Economic Law & Trade Compliance

Nairobi