World trade: Subsidy dispute: EU and USA approach each other

World trade: Subsidy dispute: EU and USA approach each other
World trade: Subsidy dispute: EU and USA approach each other

The Europeans seemed caught off guard when US President Biden signed a law along the lines of “Made in America”. Now the signs in the trade conflict are at least somewhat defusing.

The European Union and the USA have taken a significant step towards each other in the trade conflict surrounding US subsidies for green technologies. US President Joe Biden and EU Commission President Ursula von der Leyen announced in a joint statement on Friday after a meeting in the White House that they want to negotiate an “immediately” agreement on minerals for car batteries. Such an agreement should make it possible for electric vehicles manufactured in Europe to also qualify for US tax credits.

The background to the dispute is a US law that provides for billions in investments in climate protection and subsidies for US industry. This has raised concerns about competitive disadvantages in Germany and the EU. The problem from a German and European perspective with the so-called Inflation Reduction Act (IRA): Many subsidies and tax credits are linked to the fact that profiting companies use US products or produce them themselves in the USA.

A stumbling block for Europeans is now tax breaks for buyers of electric vehicles. These tax benefits are subject to certain requirements. These include requiring a certain percentage — and increasing in the coming years — of car battery parts to come from the United States or a country with which the United States has a free trade agreement.

agreement as a goal

EU manufacturers of electric cars fear major disadvantages in the US market. Because the United States has various free trade agreements – for example with Canada or Mexico. However, there is no such agreement with the European Union.

The aim now is to conclude agreements for the area of ​​critical minerals with Brussels. The term free trade agreement is not defined in the US climate law. In the joint communication from the EU Commission and the White House, there is now talk of a “targeted agreement”. After the meeting, Von der Leyen emphasized that it was agreed to work on ensuring that critical raw materials extracted in the EU would have the same access to the American market as if they had been extracted on the American market. “We will work on an agreement on that.”

Legislative package will probably not be changed

The Europeans had previously accused the United States of protectionism. Chancellor Olaf Scholz said in January that he welcomed the fact that the US wanted to invest billions in energy and climate protection. However, the SPD politician warned that requirements for certain products should not lead to discrimination against European companies. EU and US representatives have been working in the background for months to defuse the conflict.

The law is an important domestic political success for the US President. He had already made it clear in the past that he would not unravel the law again. This means that the main focus is now on room for interpretation and questions of application. Nothing will change in the basic direction of the law. Biden had recently made it clear again and again that he wanted to focus more on favoring domestic industry.

Source: Stern

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