German Federal Finance Minister Christian Lindner (left) and French Economy, Finance and Reconstruction Minister Bruno Le Maire (right) criticized the US inflation reduction act for discriminating against European companies.
Thierry Monasse | Getty Images News | Getty Images
EU member states are holding back, fearing that President Joe Biden’s Deflation Act will hurt their domestic companies and economies.
The sweeping US legislation approved by US lawmakers in August covers a record $369 billion spent on climate and energy policies, was discussed by the EU’s 27 finance ministers on Tuesday. After this chamber, there is the European Commission, which is the executive arm of the EU “serious concern” on the design of the financial incentives in the package.
“Every minister agreed that this is a matter of concern at the European level and we need to see what the best response is,” an EU official who followed the ministers’ discussions but spoke on condition of anonymity because of the sensitive nature of the matter, told CNBC.
The official added that “there is a political consensus (among the 27 ministers) that this plan threatens European industry.”
The EU has listed at least nine clauses in the US Anti-Inflation Act that could violate international trade rules. One of the biggest concerns for Europeans is the tax incentives given to electric cars produced in North America. This could pose problems for European automakers focusing on electric vehicles, e.g Volkswagen🇧🇷
“Ultimately, this is what we’re looking for: the EU should be in a position more similar to the situation of Mexico and Canada as a close ally of the US,” EU trade chief Valdis Dombrovskis said in a press statement. conference on Tuesday.
We do not want to see any decision that could harm this level playing field.
Bruno Le Maire
Minister of Finance of France
South Korean officials have expressed similar concerns to Europe, considering that the complex of measures in the United States could also be restrictive Hyundai and others from doing business in America.
A second EU official, who also followed the ministers’ discussions but preferred to remain anonymous due to the sensitivity of the issue, said the talks were “not very deep” and emphasized unity among ministers at a broader level.
The same official said that French Finance Minister Bruno Le Maire told his colleagues that the EU did not want a strong negative decision against its American friends, but rather a “wake-up call” for its European counterparts. Protecting the interests of European businesses.
“We have to be very clear, very united and very strong from the very beginning,” Le Maire told CNBC on Monday. [to] Our US partners [that] What is at stake behind this Anti-Inflation Act is the ability to maintain a level playing field between the United States and Europe.”
“A level playing field is the basis of trade relations between the two continents and we do not want to see any decision that could harm that level playing field,” he said.
French officials have long advocated strategic independence — for example, the idea that the EU would be more independent from China and the United States by supporting its own industries. Last month, French President Emmanuel Macron suggested that the EU also consider a “Buy Europe Act” to protect European carmakers.
“We need the European Purchase Act like the Americans, we have to be careful [our subsidies] “For our European manufacturers,” Macron said in an interview with France 2, adding: “You have China protecting its industry, the United States protecting its industry and Europe with an open door.”
A working group between European and American officials, which held its first meeting on the issue last week, will now meet weekly to discuss how to address Europe’s concerns about the Deflation Act.
The idea is to “continue to encourage the law to reduce costs for families, shared climate goals and a deeper understanding of the opportunities and concerns for EU producers”. White House said in the statement.
Despite regular contacts, US officials are busy with mid-term elections and the De-Inflation Act has already been enacted, meaning any changes must be made in the implementation phase.
Fredrik Erichon, director of the European Center for International Political Economy, told CNBC that “it is clear that the EU has legitimate concerns about the Deflation Act and direct and indirect discrimination in that law.”
Many of the IRA’s “America First” policies will harm competition and EU firms, particularly in sectors where the EU is competitive, not least green industries and clean technology. The EU can appeal to the WTO. [World Trade Organization] It is more interesting to solve these issues, but to solve them bilaterally,” he added.
