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Europe shows a united front against Biden’s Inflation Reduction Act

Europe shows a united front against Biden's Inflation Reduction Act
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German Federal Finance Minister Christian Lindner (left) and French Economy, Finance and Recovery Minister Bruno Le Maire (right) criticized the US inflation reduction law for discriminating against European companies .

Thierry Monasse | Getty Images News | fake images

EU member states are standing resolutely against President Joe Biden’s Inflation Reduction Act amid fears it will hurt their businesses and national economies.

The sweeping US legislation, which was approved by US lawmakers in August and includes a record $369 billion in spending on climate and energy policies, was discussed by the 27 EU finance ministers on Tuesday. This came after the European Commission, the executive arm of the EU, said there is “serious concerns” on the design of the financial incentives in the package.

“Each minister agreed that this is an issue of concern at the European level and that we have to see what the best response is,” said an EU official, who followed the ministers’ discussions but preferred to remain anonymous due to to the delicate nature of the matter. matter, he 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 items in the US Inflation Reduction Act that could violate international trade rules. One of the biggest sticking points for Europeans is the tax credits given to electric cars made in North America. This could bring challenges for European automakers that are focusing on electric vehicles, such as Volkswagen.

“That’s what we’re looking for eventually: for the EU to be, as a close ally of the US, in a position more similar to that of Mexico and Canada,” Valdis Dombrovskis, EU trade chief, said in a statement. a press conference. Conference Tuesday.

We don’t want to see any kind of decision that could damage this level playing field.

Bruno LeMaire

Finance Minister of France

South Korean officials have also raised similar concerns with Europe, given that the US set of measures could also restrict hyundai and others from doing business in the United States.

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 talks were “not very deep”, highlighting the unity between ministers in a broader level.

The same official said France’s finance minister, Bruno Le Maire, told his counterparts that he was not asking for a strong negative decision against America’s friends of the EU, but rather a “wake-up call” for their European counterparts who they need to protect the interests of European business.

Earlier on Monday, Le Maire told CNBC: “We need to be very clear, very united and very strong from the beginning explaining [to] our american 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.”

“The equality of conditions is the core of the trade relationship between the two continents and we do not want to see any type of decision that could damage this equality of conditions,” he said.

We are concerned about the consequences of the Inflation Reduction Law: Christian Lindner

French officials have long championed strategic independence: the idea that the EU needs to be more independent from China and the US, for example by supporting its own industry. Last month, French President Emmanuel Macron suggested the EU should also consider a “European Purchasing Law” to protect European carmakers.

“We need a European Purchasing Law like the American one, we have to reserve [our subsidies] for our European manufacturers,” Macron said in an interview with France 2, adding: “You have China that is protecting its industry, the United States that is protecting its industry, and Europe that is an open house.”

A working group of European and US officials, which had its first meeting on this issue last week, will now meet weekly to discuss how to address Europe’s concerns about the Inflation Reduction Act.

The idea is to “continue to promote a deeper understanding of the law’s significant progress in reducing costs for families, our shared climate goals, and the opportunities and concerns for EU producers,” said the The White House he said in a statement.

Despite regular contact, US officials are grappling with midterm elections and the Inflation Reduction Act has already been legislated, meaning any changes would have to occur during the implementation phase.

Fredrik Erixon, director of the European Center for International Political Economy, told CNBC that “it is obvious that the EU has legitimate concerns about the Inflation Reduction Act and the direct and indirect discrimination in it.”

“Many IRA policies that take an ‘America First’ attitude will harm competition and EU business, and especially in sectors where the EU is competitive, notably green industries and clean technologies. The EU can go to the WTO [World Trade Organization] to resolve these issues, but is much more interested in addressing them bilaterally,” he added.

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