Trump’s new NAFTA should make copper a priority

Trump’s new NAFTA should make copper a priority
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President Donald Trump has prioritized two policy areas with profound impact on the national economy as well as national security: trade and critical minerals. The two issues unexpectedly intersect in the negotiations on an updated North American Free Trade Agreement — with positive implications for all three NAFTA nations.

Reports indicate that NAFTA negotiators from the U.S., Canada and Mexico may be nearing agreement on new rules on NAFTA’s “auto rules of origin” provision that’s meant to ensure that major parts of the vehicle are in fact manufactured in the U.S., Mexico or Canada. As any car-buyer knows, it’s there on the window sticker, among a bewildering array of eye-straining fonts are columns showing which country produced what percentage of the vehicle.

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But that’s always been an imperfect measure, because when it comes to one of the most common inputs in a vehicle — the metal — NAFTA has never even attempted to calculate the country of origin.

 

Metals used in our cars have simply been “deemed to originate” within NAFTA, no matter that they come from Asia, the EU or elsewhere. Not surprisingly, the percentage of non-NAFTA materials in NAFTA country products has risen from 14 to 27 percent in the first 15 years of the treaty.

President TrumpDonald John TrumpTrump warns Iran's Rouhani: Threaten us 'and you will suffer' Pompeo: Iran's leaders resemble the mafia NYT's Haberman: Trump 'often tells the truth' MORE and his trade team have prioritized removing this blind spot on raw materials. According to officials close to the talks, there is an emerging consensus to add aluminum and steel to the country of origin requirements, which will strengthen the demand for these key metals.

That’s progress. But before the ink dries, here’s one more metal that the Trump team should be considering that would bring benefits to the western part of the U.S.: copper.

Copper is increasingly key to the cars of the future. The typical Electric Vehicle (EV) requires nine times more copper than its internal-combustion forebear. To put that into every-day perspective, a single electric car can contain as much as four miles of copper windings and wiring.

And that could be copper produced in North America. Right now, the U.S., Canada and Mexico are all among the world’s top 10 copper-producing countries (Nos. 4, 8 and 10, respectively), collectively producing over 2 million metric tons a year. With demand already outpacing supply, there’s a ready market for more North American copper production. There is simply no reason to allow non-NAFTA countries “copper citizenship” (or steel or aluminum for that matter) when it comes to calculating the North American content in our cars.

Doing so punishes North American metals and minerals producers, and contributes to a chilling effect that depresses the incentives for increased resource production. And while Mexico doesn’t produce much in the way of aluminum or steel, its significant copper production would give it a “metals win” in the NAFTA negotiations.

With copper usage in electric vehicles ready to redefine metals requirements in the automotive sector, the U.S., Canada and Mexico should ensure that the supply chain for copper inputs is part of the strategy to make North America’s integrated supply chain — from mine to market — as competitive as possible.

And for the U.S., there’s a national security consideration as well: Copper mining is a key gateway to co-products like rhenium, tellurium, cobalt and even the rare earths — materials the Trump administration has just recognized as “critical minerals” for our economy and national defense. Adding copper to the NAFTA list would help strengthen the North American “metals industrial base.”

In the global quest to become more competitive, why not put North America first by adding copper to NAFTA’s content list, and strengthen the region’s ability to produce the next generation of electric vehicles?

Daniel McGroarty is head of the American Resource Policy Network, a non-partisan association of resource development experts. McGroarty has testified on critical mineral issues in both the U.S. House and Senate.