German Federal Finance Minister Christian Lindner (L) and French Minister of Economy, Finance and Recovery Bruno Le Maire (R) both criticized the US’s inflation reduction measures to diversify European companies.
Thierry Monasse Getty Images News | Getty Images
European Union member states are standing firm against President Joe Biden’s Anti-Inflation Act amid fears it will harm companies and the domestic economy.
The sweeping US legislation, which was approved by US lawmakers in August and includes a record $369 billion in spending on climate and energy policy, was discussed by 27 EU finance ministers on Tuesday. This comes after the European Commission, the EU’s executive arm, said there was “serious concern” about the design of financial incentives in the package.
“Every minister agreed that this is a problem at the European level and we need to see what the best response is,” said an EU official, who followed the ministers’ discussions but preferred to remain anonymous due to their sensitive nature. problem, told CNBC.
The same 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 points in the US Inflation Reduction Act that may be in breach of international trade rules. One of the biggest sticking points for Europe is the tax credits given to electric cars made in North America. This could pose a challenge for European automakers focusing on EVs, e.g Volkswagen.
“That’s what we’re eventually looking for: that the EU should, as a close ally of the US, be in a position more similar to Mexico and Canada,” Valdis Dombrovskis, EU trade chief, said in a press release. Tuesday conference.
South Korean officials have also raised similar concerns to Europe, if the set of measures in the US 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 sensitive nature of the issue, said the conversation was “not very deep” – highlighting unity among ministers at a broader level.
The same official said that the French finance minister, Bruno Le Maire, told his colleagues that he did not ask for a strong negative decision against the American friend of the European Union, but asked for a “wake-up call” for its European partners in need. protect the interests of European businesses.
Earlier on Monday, Le Maire told CNBC: “We have to be very clear, united, and very strong from the beginning to explain. [to] our US partners [that] What is at stake behind this Inflation Reduction Act is the possibility of preserving a level playing field between the United States and Europe.”
“A level playing field is at the core of trade relations between the two continents and we do not want to see any decision that could harm this level playing field,” he said.
French officials have long advocated for strategic independence – the idea that the EU should be more independent from China and the US, for example, by supporting its own industry. Last month, French President Emmanuel Macron suggested that the EU should also look at a “Buy Europe Act” to protect European carmakers.
“We need a Buy Europe Act like America, we need a reserve [our subsidies] for our European factories,” Macron said in an interview with France 2, adding: “You have China which protects its industry, the US which protects its industry and Europe which is an open house.”
A task force between European and American officials, which had its first meeting on this topic last week, will now meet every week to discuss how to deal with Europe’s concerns about the Inflation Reduction Act.
The idea is to “continue to promote a deeper understanding of the meaningful progress of the law on lowering costs for families, our shared climate goals, and opportunities and problems for EU producers,” The White Building said in a statement.
Despite regular contact, US officials dealing with midterm elections and the Inflation Reduction Act have been legislated, meaning any changes must come during the implementation phase.
Fredrik Erixon, director of the European Center for International Political Economy, told CNBC that “it is clear that the EU has legitimate concerns about the Inflation Reduction Act and direct and indirect discrimination within it.”
“Many IRA policies that take an ‘America first’ attitude will harm competition with EU firms, and especially in sectors where the EU is competitive, at least the green and cleantech industries. The EU could go to the WTO. [World Trade Organization] to sort out this issue but it is preferable to resolve it bilaterally,” he added.