EU and US officials committed in principle to resolving a dispute over electric vehicle (EV) incentives that threatens to spark a trade war, without Washington making specific concessions and time running short.
The Inflation Reduction Act (IRA), which the EU says provides unfair subsidies to US manufacturers and threatens to undermine the transatlantic relationship, has caused alarm in European capitals that only eased during French President Emmanuel Macron’s visit with US President Joe Biden last week.
US officials continued the charm offensive, with representatives from the European Commission on Monday at the third Trade and Technology Council meeting in College Park, Maryland, north of Washington.
European Commissioner for an Economy that Works for People Valdis Dombrovskis said that he was leaving the meeting “more optimistic than when we arrived,” but stressed urgency.
“We don’t have long — the IRA is due to be implemented next January,” he said. “We need to see results still this year.”
It could be difficult for the US to find a way of placating Europe, as the IRA has already passed. EU officials are pushing for the US to provide exceptions to European countries — similar to what Canada and Mexico have.
The most likely route to try to accommodate EU concerns would be for the US Department of the Treasury to issue a waiver allowing European vehicles to qualify, said William Reinsch, who served as undersecretary of commerce for export administration in former US president Bill Clinton’s administration.
While such an interpretation of the law would be unlikely to hold up in court in the face of lawsuits from groups that favor a stricter interpretation, that process could take years to play out, providing an interim solution, said Reinsch, now a senior adviser at the Center for Strategic and International Studies in Washington.
In Europe, more politicians are calling for a regional response that would rival the IRA — a move that risks shifting the fight over industrial subsidies from the US to within the bloc.
In a speech over the weekend, European Commission President Ursula von der Leyen pushed to re-examine state-aid rules and create a European fund to invest in clean tech.
While backed by key countries such as France, these ideas are controversial for fiscally conservative EU countries and even within the commission.
German Minister of Finance Christian Lindner said the EU must be more agile, and there is “room for improvement” on state aid, but called for more debate on other aspects of Von der Leyen’s proposal, especially the creation of a European sovereignty fund.
“If that means a kind of rebranding of existing tools, I’m open to discussion,” Lindner said.
However, if it means issuing new common European debt, “then I think this would not be an improvement of our competitiveness or stability — it would be a threat,” he said.
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