Aluminum Free Trade Agreements: Excluding the Raw Material from Tariff Liberalization
The aluminum industry emphasizes the importance of the European Commission adopting a sector-specific approach in the negotiations for a Free Trade Agreement (FTA). The lightweight metal must be excluded from tariff liberalization with aluminum-rich countries such as India, Indonesia, Malaysia, and the United Arab Emirates (UAE).
Aluminum is recognized as a critical and strategic raw material under the EU Critical Raw Materials Act and by NATO, due to its essential role in green technologies, digitalization, aerospace, and defense. Strengthening domestic production, increasing recycling, and reducing import dependence are key to Europe's strategic autonomy and resilience.
The Risks of Aluminum Free Trade Agreements
The ongoing negotiations between the EU and India, Indonesia, Malaysia, and the United Arab Emirates raise serious concerns. These countries are rapidly expanding aluminum production across the value chain, supported by:
- Subsidized fossil fuels;
- Low-cost capital;
- Lower environmental, labor, and safety standards.
Primary production in the United Arab Emirates and India is at least three times higher than that of the EU. Indonesia alone is expected to add 1 million tons of new capacity, equivalent to the entire current EU production.
The impact of cheap aluminum imports risks permanently compromising the survival of European production, already severely weakened by the energy crisis of recent years.
Combating Carbon Leakage and Unfair Competition
Aluminum from the aforementioned countries has a much higher carbon footprint, especially in India, where coal-fired production generates three times higher emissions than European production.
Granting greater market access through aluminum free trade agreements would worsen carbon leakage and undermine the European Union's climate goals.
Unfortunately, the CBAM in its current form is ill-suited to address these risks due to loopholes and a high potential for circumvention. Countries such as the United Arab Emirates and Malaysia have served as transit hubs for Chinese aluminum evading EU anti-dumping duties, as recently confirmed in a fraud case by the European Public Prosecutor's Office.
The European Production Crisis
Due to the energy crisis, European primary aluminum production decreased by 50% between 2022 and 2023. Today, the sector faces:
- High energy costs;
- Global market volatility;
- Growing regulatory pressure.
Further market opening to countries with unfair advantages would threaten the survival of the remaining EU producers, in direct contradiction to the Clean Industrial Deal and the Action Plan for Steel and Metals.
The Need for Strategic Protectionism on European Aluminum
While supporting trade diversification, a one-size-fits-all approach is not viable. To protect a strategic sector like aluminum, trade and industrial policies must be better aligned, as also recommended in the Draghi report.
European aluminum protectionism does not represent an ideological closure to international markets, but rather a necessary defense of a sector critical to Europe's strategic autonomy, green transition, and industrial security. Excluding aluminum from tariff liberalization in aluminum free trade agreements with countries operating with different environmental and social standards is a choice that ensures consistency between trade policy, climate objectives, and industrial resilience.
Source: A&L Aluminium Alloys Pressure Diecasting Foundry Techniques