The EU27 trade ministers, or at least most of them, their representatives, meeting in Prague on Sunday 30 and Monday 31 October, sent a clear signal to US Trade Representative Katherine Tai that they have a big problem with the US Inflation Reduction Act (IRA).
The legislation passed in August favours US, Mexican and Canadian producers in the granting of tax credits, particularly for electric vehicles (see EUROPE 13012/16, 13015/26). “It would appear that many of the green subsidies provided for in the Act may discriminate against EU automotive, renewables, battery and energy-intensive industries”, said the EU Commissioner for Trade, Valdis Dombrovskis.
Not only have the large Member States, such as France and Germany, complained about this, but the smaller countries are also concerned.
Valdis Dombrovskis met with Katherine Tai on the evening of 30 October, before meeting her for a dinner with ministers the following day. A few days earlier, the EU and the US had announced the creation of a task force on the IRA.
At this stage, discussions are still exploratory, according to an EU source. Both sides need to study and understand the options available to them to limit the impact on European producers. The ministers were able to reiterate their request to Mrs Tai over lunch.
“I will be pretty frank: I think that, in the form the IRA was presented, I think for the EU it’s unacceptable. We simply expect that we’ll get the same status as Canada and Mexico”, the Czech Minister for Trade, Jozef Síkela, told EUROPE ahead of the meeting.
The United States seems, for the time being, to be rather cautious on this issue, as indicated by a European source close to the dossier. According to Mr Síkela, Europeans must also be “ realistic”. Furthermore, he said, “we must respect the fact that this is a legal act that went through a democratic legal procedure in the US”.
A “subsidy race” must be avoided
A clear answer from the United States is in any case not expected before the mid-term elections in Washington on 8 November. A second European source hopes to have answers before the next meeting of the EU-US Trade and Technology Council (TTC) (see EUROPE 13050/20).
The EU wants to find an arrangement with its transatlantic partner and thus avoid a subsidy race, towards which there are signs this could happen. French President Emmanuel Macron, for example, has called for greater protection of European interests, including a “Buy European Act”.
Several EU officials indicate that a response to protect European companies may need to be considered. For the time being, “we are giving the negotiations a chance before further considerations”, Mr Dombrovskis told EUROPE. (Original version in French by Léa Marchal)