The issue returned to the agenda of the EU ministers - this time the economy ministers - on Tuesday 8 November. The US Inflation Reduction Act (IRA) and its potential impact on European businesses continues to be a concern for Member States and the European Commission (see EUROPE 13054/2).
Despite the general commotion, everything must be done to avoid a trade war, according to German Economy Minister Christian Lindner. “I’m not so sure that the Americans have really heard our exact concerns about this law”, he told the press. This is why a dialogue must be opened, he said, with this principle in mind: “valuable partners should remain privileged trading partners”.
EU Trade Commissioner Valdis Dombrovskis briefed economy ministers on the impact of the IRA at their meeting on 8 November. He also considers that dialogue should be given a chance before threats of retaliation are made.
The new EU-US ‘task force’ on theIRA aims to find a common solution (see EUROPE 13051/26). The European Commission has also sent comments on the IRA to Washington as part of a consultation.
“The green transition is not something to be achieved at the expense of others”, according to the European Commission.
In a seven-page document, the Commission details nine types of tax credits in the IRA that it believes are problematic. They cover production and investment activities in electricity, fuels or clean vehicles. The tax credits in these nine areas are contingent on production or assembly obligations in North America.
For the Commission, this is not compatible with the General Agreement on Tariffs and Trade or the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures.
These tax advantages can potentially redirect investment and production, threatening jobs and growth in Europe and elsewhere, the Commission says. “For the European Union, the green transition is not something to be achieved at the expense of others”, the Commission points out in its comments.
Another danger posed by the IRA is that it could potentially encourage other countries to adopt similar measures, create tensions and even lead to retaliatory measures, the Commission fears, citing a possible “subsidy race”.
The Commission is therefore calling for either the removal of the discriminatory elements or an exemption status for European producers so that their products can also benefit from the tax credits.
Two European officials say that the EU would like to reach a solution with its transatlantic partner by the next EU-US Technology Council (TTC) meeting on 5 December (see EUROPE 13050/20).
While there is a willingness on the US side to find an arrangement, a politically acceptable and technically feasible solution has not yet been found.
See the European Commission’s comments on the IRA: https://aeur.eu/f/3yb (Original version in French by Léa Marchal)