Technology companies' work on the issue of rare earth metal exports

The management of the EU's so-called strategic dependencies is a central part of the work that Teknikföretagen conducts within the framework of the EU's industrial policy and economic security, but also in a national context regarding the role of industry in Sweden's preparedness and total defense capability. Teknikföretagen has an ongoing dialogue with several different parts of the Government Offices, but also directly with the EU institutions, where Joel Jonsson, among others, represents the European umbrella organization Orgalim in the EU Commission's expert group for economic security.

In a slightly simplified way, the work is structured into three pillars: promoting production capacity within the EU, how we can cooperate with other countries to strengthen security of supply, and finally protecting the internal market from measures in third countries that are taken on non-market grounds.

There is broad agreement on the situation within the EU: unilateral dependence on potentially unreliable actors that can be used for economic blackmail is not sustainable, especially given how important these types of critical raw materials are for the development of the technologies required for both the green transition and our security and defense policy interests.

At the same time, member states have different views on how this can best be achieved. One camp advocates an increasingly interventionist policy at EU level with state support for selected technologies. On the other side are those countries that emphasize the importance of good general conditions and well-functioning markets to promote innovation and technological development in order to be competitive in the long term. This also means giving up trade policy, with some wanting to be more assertive in the relationship with China and for the EU to use trade policy protection instruments on increasingly political grounds; while others see a risk that this will lead to the very behavior we are trying to counteract – that is, China restricting access to these critical raw materials or other important input goods – before we have found alternative sources for them.

Joel Jonsson understands that there is concern among entrepreneurs, especially in the electronics industry.

The issue of managing different types of strategic dependencies and economic security is at the top of the political agenda right now, especially given the uncertainty that prevails in our world in combination with an increasing competition to control technological development in strategic areas. Hopefully, it can reassure companies that politics is at least doing everything it can, even if, as mentioned, there are slightly different views on the measures which are most appropriate to address the development.

Svensk Elektronik has been following this issue for a long time and we have also been clear about our position. To get a better picture of how the situation affects the industry and have a better basis for discussions with politicians, we conducted a survey among our members. The results were summarized and then sent to the Brussels office.

From the Swedish Technology Companies Association's perspective, the starting point is always that companies know best what is happening in practice, and this type of input is always appreciated. The survey shows how dependent we are in Sweden on trade with China and our potential vulnerability to potential trade restrictions that limit access or otherwise make trade more difficult. It emphasizes the importance of not taking political measures that unnecessarily lead to costly countermeasures, while giving industry opportunities to diversify supply chains.

We usually emphasize the importance of enabling companies to use as broad a base of subcontractors as possible, in order to be able to do their own risk analysis and arrange production patterns in the best way – while also making it easier to adapt supply chains to disruptions in world trade. Regarding raw materials in particular, we must facilitate exploration through, for example, better permit processes and invest in research and development regarding alternative materials. A lot is already being done here both nationally and at EU level, as well as working with countries outside the EU within the framework of trade and development policy.

Even though many decisions are made at the EU level and the Swedish Technology Association works comprehensively on these issues, there is a point in industry organizations such as Svensk Elektronik getting involved and driving the issue, says Joel Jonsson.

It is always good to be as specific as possible to highlight where the problems lie and what can be done beyond what is already being done. This could be technical issues, such as difficulties with the processes for obtaining permission to import the materials under different regulatory frameworks or export control regimes.

While there is good engagement on these issues, there is a responsibility for industry organisations to balance the debate and not be too alarmist. This can lead to hasty political measures, which can have an impact on international trade. Politicians are aware of the problem, now it is about finding the right measures to ensure our security of supply over time. It is a larger task, where alliances of like-minded people need to be built to influence the direction of policy.

Much is in the EU's own hands

What does the future look like then? Joel Jonsson believes that the EU is at a crossroads and is trying to find its role between China and the USA. The global race with an increasingly active industrial policy to control the development of the technologies required to secure geo-economic interests is currently driving a regionalization of trade in politically identified areas. This is happening both as a result of state support to replace various types of import dependencies with domestic production capacity, but also through discriminatory regulations that lead to barriers to trade and the need for market-specific product adaptations.

Here it is important to be able to keep several thoughts in mind at the same time: to relate to the parallel regulatory frameworks that are being established, to ensure that there are still good conditions for trade with China and, in parallel, to work actively to ensure security of supply, not least by enabling companies to diversify their supply chains.

How the situation regarding access to critical raw materials develops is, at the same time, very much in the EU's own hands; and if we choose to introduce trade protection instruments against China, Beijing has already made it clear that they will take measures to defend their economic interests. Personally, I hope for a more balanced approach and that the recently established forums to discuss export controls and raw materials between the EU and China will help to de-escalate any conflicts that arise.

Facts – Joel Jonsson:
Responsible for issues related to international trade at Teknikföretagen. This can include everything from the EU's internal market, EU industrial and trade policy, and Sweden's work on EU issues at a general level. He is also currently acting head of Teknikföretagen's Brussels office.

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