EU ministers say time is running out to resolve a worsening dispute with the United States over $369 billion in green aid from Washington as they try to avert a transatlantic trade war.
Brussels and Washington have set up a task force to deal with the impact of the Inflationary Reduction Act (IRA) and Buy American provisions, but European capitals are growing impatient with the lack of progress.
Czech Minister Jozef Sikela, who is leading a meeting of EU trade ministers in Brussels on Friday, said he wanted solutions for the next meeting of the separate bilateral Trade and Technology Council on 5 December.
“What is important to us is that the United States is aware of our concerns and that the working group must develop a solution that is acceptable to both sides,” he added. “We will be focused on creating some solutions for the TTC on December 5.”
His comments underscore growing concern in the EU about the scale of the US support system and concerns that failure to secure better terms for the EU could lead to a serious row at a time when both sides should prioritize transatlantic unity. Russia’s invasion of Ukraine.
Dutch Trade Minister Liesje Schreinemacher called the IRA “very worrying” and added: “I want to avoid a trade war by all means. No one benefits from any trade war.”
The IRA provides tax credits and subsidies to American consumers and businesses for products such as electric vehicles, wind turbines and green hydrogen as the United States tries to reduce carbon emissions while creating jobs. Most are only available for products made in the United States.
It comes into effect on January 1, but several EU companies have already said they will choose the US over the EU as their next investment. Energy prices are much lower in the US, which is an added attraction.
According to EU Trade Commissioner Valdis Dombrovskis, the TTC meeting will be “a good opportunity to take stock of the working group’s situation and then decide on the next steps”.
Some EU member states, such as France, have called on Brussels to replicate the US law with its own “buy European” subsidy scheme. German Economy Minister Robert Habeck also proposed increasing subsidies.
French Prime Minister Élisabeth Borne held talks with German Chancellor Olaf Scholz in Berlin on Friday. He told journalists that the EU “will direct investments into the energy transition”. The two countries “are very much in agreement on the use of European instruments. . . and focusing on new technologies so that they can be implemented faster and with less bureaucracy”.
After a meeting of trade ministers, Dombrovskis warned that “subsidy competitions tend to be expensive and ineffective”. He added that the bloc provides large subsidies for the greening of the economy, “but it is essential that we do this in a more targeted and efficient manner.”
Leo Varadkar, Ireland’s deputy prime minister, said: “No one wants to get into a tit-for-tat or subsidy race, but what the US has done is really not in line with the principles of free trade and fair competition.”
But other smaller and more liberal states, such as the Netherlands and Sweden, have warned against subsidy competition or a discriminatory system that could lead to retaliation from other trading partners.
Additional reporting by Guy Chazan in Berlin