European Union ministers say time is running out to resolve a simmering dispute with the United States over Washington’s $369 billion in green subsidies as they seek to avert a transatlantic trade war.
Brussels and Washington have set up a working group to address the impact of the IRA and its “Buy American” provisions, but European capitals are wearing thin with the lack of progress.
Josef Sekela, the Czech minister chairing a meeting of EU trade ministers in Brussels on Friday, said he wanted solutions by the next meeting of the separate bilateral trade and technology council on December 5.
He added, “What is important for us is that the United States recognizes our concerns and that the working group must work to find a solution that is acceptable to both parties.” “We will focus on developing specific solutions for the TTC on December 5th.”
His comments underscore growing concern in the European Union about the size of the US support scheme, and fears that failure to obtain better EU terms could lead to a serious conflict at a time when both sides need to prioritize transatlantic unity in the face of Russia’s invasion of Ukraine.
Dutch Trade Minister Lesje Schrenemacher called the IRA “extremely troubling”, adding: “I want to avoid a trade war by any means. No one benefits from any trade war.”
The IRA provides tax breaks and subsidies to American consumers and businesses for products such as electric cars, wind turbines, and green hydrogen as the United States tries to reduce carbon emissions while creating jobs. Most are only available for products that are largely made in the United States.
It takes effect on January 1, but several EU companies have already said they will choose the US over the EU for their next investment. Energy prices are much lower in the United States, which adds an extra attraction.
Valdis Dombrovskis, the EU’s trade commissioner, said the TTC meeting would provide “a good time to take stock of the working group’s performance and then decide on the next steps.”
Some EU members, such as France, have called on Brussels to replicate the US law with its own “European buy” subsidy system. German Economics Minister Robert Habeck also suggested an increase in subsidies.
Even Ireland, one of the US’ staunchest allies in the European Union, has warned of the consequences if a quick solution is not found. Leo Varadkar, Deputy Prime Minister, said: “There will be a response from the European Union. Nobody wants to get into a one-on-one race or to subsidize but what the US has really done is not compatible with the principles of free trade and fair competition.”
But other smaller, more liberal countries such as the Netherlands and Sweden have warned of a subsidy race or discriminatory system that could invite retaliation by other trading partners.