To build back better, the US must reach out across the Atlantic

At the recent G7 summit, President Biden and the G7 leaders launched the Build Back Better World partnership (B3W). For it to be a real alternative to China’s Belt and Road Initiative and to be truly ‘an initiative for clean and green growth,’ sustainability and resilience will need be deeply integrated. And rather than ‘going it alone’, U.S. collaboration with transatlantic partners will be the key to success.

Seizing the moment

Sustainable infrastructure, green economic recovery and creating resilient supply chains for critical raw materials are high on the Biden administration’s agenda. The ‘B3W’ initiative can be seen as the extension of Biden’s domestic agenda and needs to be understood in the context of recent U.S. policy initiatives — in particular the White House 100-Day Review that outlines steps to strengthen critical supply chains and manufacturing. Two areas of focus are securing supply chains of semiconductors and creating an end-to-end domestic supply chain for advanced batteries — both key technologies for a future-proof and net zero economy.

Furthermore, the Biden administration has emphasized the need to collaborate with allies and stakeholders from industry and non-profit sectors to ensure supply chain resilience at a time of strategic competition with China. As the U.S. and Europe are in the process of resolving long-standing trade issues, for instance reaching an agreement to end the 17-year civil aircraft dispute, the moment is ripe for further transatlantic cooperation. Across the Atlantic, the EU and its member states as well as the UK are also dependent on critical raw materials for the twin transitions to the digital and green economies. In 2020, the EU identified a list of 30 critical raw materials and supply chain dependencies for technologies used in three strategic sectors: renewable energy, e-mobility, defense and aerospace.

A transatlantic action plan

One particular area for transatlantic collaboration should be the ‘circular economy’ — an economic model that aims to create resilient supply, eliminate the loss of critical materials through enhanced recovery and recycling, and create value and jobs. It has been gaining traction among businesses across Europe, and the European Commission adopted an updated Circular Economy Action Plan in 2020 — a key strategy for sustainable industrial development.

In March 2021, the EU launched the Global Alliance on Circular Economy and Resource Efficiency (GACERE) initiative which aims to create better cooperation between Europe, the UN system and member countries which other G7 members Canada and Japan. By joining GACERE, the U.S. could realize environmental benefits, boost economic competitiveness, help to ensure supply of critical materials, and revitalize relations with key allies.

Furthermore, the circular economy offers opportunities for trade in green technologies, sustainable products and secondary materials, new business opportunities for remanufacturing and product design, and commercialization of new materials. The U.S. and partners should develop new sustainability standards for critical materials as highlighted in the 100 Day Review. In this regard, synergies exist with European efforts on the Sustainable Products Initiative.

While critical raw materials and batteries are the obvious starting point for enhanced transatlantic collaboration in light of recent supply bottlenecks, down the road it should be expanded to other critical supply chains — such as plastics, textiles and electronics.

Finally, investments in sustainable production and processing of critical minerals require new investment models that have fewer negative impacts upon society and environment. The EU Taxonomy guidelines are a good starting point to develop sustainable finance portfolios across the Atlantic. It also offers new cooperation opportunities to build on the recently agreed G7 tax deal.

Looking South — African supply chains

Focusing on the U.S. and Europe is necessary, but insufficient to create greater resilience. One lesson from the COVID-19 pandemic is that supply chains are global and interconnected. Focusing on the transatlantic partners or the Global North only, does not create greater resilience. The transatlantic partners need to engage and support developing countries, especially Africa’s extractive sector. As pointed out by the Atlantic Council, African countries are key to secure critical supply chains — The DRC for example produces most of the world’s cobalt, a key component in rechargeable batteries.

If the B3W partnership is to deliver on clean and green growth, equitable human development and to help meet the infrastructure needs in low- and middle-income countries, the circular economy should be embedded in the initiative. And in order to advance the transition to this resilient, greener, sustainable circular economy, a strong transatlantic alliance could be a real game changer.

Dr. Patrick Schröder (@patricks_CH) is a senior research fellow of the Energy, Environment and Resources Programme at Chatham House, The Royal Institute of International Affairs in London. He leads the institute’s research programme on the circular economy.

Marianne Schneider-Petsinger (@mpetsinger) is a senior research fellow in the US and the Americas Programme at Chatham House.