India Has Lithium. But Who’ll End Up Benefiting From It?

Source: The post is based on the article “India Has Lithium. But Who’ll End Up Benefiting From It?” published in The Times of India on 4^th May 2023.

Syllabus: GS 3 – Issues Related to Mobilization of Resources

Relevance: concerns associated with inferred lithium.

News: The Geological Survey of India has inferred lithium resources of 5.9 million tonnes in Reasi, Jammu and Kashmir.

This might help in establishing domestic manufacturing industry of lithium batteries in India. However, there are also concerns associated with it.

What are the concerns with the finding of inferred lithium?

Overall global demand for minerals which help in green transition has increased. This includes minerals like lithium, nickel, cobalt including Rare Earth Elements.

Today, developed countries are looking for various routes including certain provisions in their trade agreements in order to secure the supplies of these scarce minerals.

Therefore, India should also expect to face such demands in the FTA negotiation with the EU and the US-led Indo-Pacific Economic Partnership Framework for Prosperity (IPEF).

Why are developed countries looking to secure the supplies of scarce minerals?

First, developed countries want to ensure that resource-rich developing countries remain exporters of primary commodities and they do not get involved themselves into downstream processing activities. This would eliminate competition from developing countries.

Second, trade agreements also make natural resources available to the developed countries at relatively lower prices.

These two objectives are achieved through FTA commitments by prohibiting FTA partner countries from imposing export restrictions.

Why do developed nations forbid FTA partners from putting export restrictions, and what are the concerns with certain FTA provisions?

Export restrictions: Export restrictions allow developing nations to increase domestic availability of natural resources for downstream processing rather than exporting them to the developed countries.

Therefore, if trade agreements forbid developing nations from imposing export restrictions, such as export taxes, then they would be forced to stay at the end of the value chain and only export raw materials.

Foreign Trade Agreements (FTA): One set of provisions commits FTA partners to open up their mining sector and treat foreign companies from other FTA partners on par with their domestic companies.

Further, environment-related provisions in EU’s FTAs require FTA partners to establish high standards of environmental protection for mining operations, promote the values of responsible sourcing and mining, etc.

Hence, such kinds of provision in FTAs would benefit developed countries to get access to minerals of the developing countries.

This is because mining firms based in developed countries have access to the latest technology and would be able to comply with high standards of environmental protection than mining firms of the developing countries.

Thus, environmental conditionalities contained in FTAs could give advantages for firms from developed countries to explore and exploit the natural resources in developing countries.

What can be the way ahead?

Resources led the way for colonization in the past. This means that the rich countries today, instead of fighting, might adopt other means of controlling the developed countries.

It also presents concerns over acquiring data and digital sequencing information (DSI) of genetic material in the arena of biotechnology.

Hence, India as the voice of the Global South, should take up this issue forcefully and prevent a tragic repeat of history.