European criticism of US President Biden’s climate protection and social package is massive. The EU fears distortions of competition. Commission President von der Leyen is now going one step further and is talking about countermeasures. She wants to spend a lot of money on this.
EU Commission President Ursula von der Leyen spoke out in favor of EU measures against “distortions” in the conflict over US President Joe Biden’s subsidy policy. The EU must “take measures to create a level playing field” where the US climate protection and social package worth billions or other advances “lead to distortions,” von der Leyen said in a speech at the College of Europe in Bruges, Belgium.
“As a consumer in the United States, you get a tax break when you buy electric vehicles that are manufactured in North America,” von der Leyen said. “And if you’re a manufacturer of batteries for those same electric vehicles, you get a tax break if you manufacture in the US.”
This means that an automaker has a double advantage if it produces in North America and buys parts in the US. In addition, this could also pull critical components and raw materials into the USA and withdraw them from the transatlantic supply chains. “We are already seeing how this could affect Europe’s own clean technology base as well, by redirecting investment flows,” von der Leyen warned. In this competition, however, the same competitive conditions would have to prevail.
Von der Leyen did not say in the speech how much additional money the EU should provide to make this possible. Specifically, however, she suggested expanding the existing REPowerEU program first. In particular, this enables investments in energy efficiency, in renewable energy and in the infrastructure of the Energy Union. In the medium term, money should then be made available for upstream research, innovations and strategic projects via the sovereignty fund that she proposed back in September. ‘The underlying logic is simple: a common European industrial policy requires common European funding,’ she said.
With a view to cooperation with the USA, von der Leyen proposed, among other things, the establishment of a “Club for Critical Raw Materials”. The production and processing of certain critical raw materials are now controlled by China, she said. Cooperation with partners and allies in sourcing, production and processing could make it possible to break the monopoly.
On the possible adjustment of public investment rules in the EU, von der Leyen said the US investment program should make one think about how to improve the state aid framework and adapt it to a new global environment. Attention is currently being paid to avoiding distortions in the EU internal market, but it is now necessary to respond to increasing global competition for clean technologies.
The US and Europe are currently at odds over Biden’s multi-billion dollar climate and welfare package, known as the Inflation Reduction Act (IRA). It provides 370 billion dollars (around 357 billion euros) for climate protection and energy security – including subsidies for electric cars, batteries and renewable energy projects “Made in the USA”. The subsidies are met with massive criticism in the European Union. The EU states fear that European companies will be disadvantaged and that important sectors of the economy will migrate.
During a visit to the United States, French President Emmanuel Macron described Washington’s measures as “super aggressive”. He warned: “These decisions will divide the West.” Critical tones also came from Berlin. “The USA is our value partner, but at the same time there is an enormously protectionist economic policy,” said Federal Finance Minister Christian Lindner from the FDP of the “Welt am Sonntag”. But he warned of a trade war. Germany must rely on “economic diplomacy”.
It is now eagerly awaited how the EU states will react to von der Leyen’s proposals, such as the demand for additional European funding to promote clean technologies. The federal government has repeatedly emphasized that it currently sees no need for new pan-European investment programs. In addition, member states have repeatedly argued that violations of WTO rules should not be answered by relaxing their own standards.
At a meeting of the EU and US Trade and Technology Councils on Monday, representatives from Washington and Brussels want to discuss the massive European concerns about the IRA subsidies. The head of the Trade Committee in the EU Parliament, Bernd Lange from the SPD, had recently no longer expected any significant progress in the talks and therefore called for the EU to file a complaint with the World Trade Organization (WTO).
