EU ministers say time is running out to resolve the deepening dispute with the United States over Washington’s $369 billion in green subsidies as it seeks to avoid a transatlantic trade war.
Brussels and Washington have set up a task force to deal with the impact of the Inflation Reduction Act (IRA) and its Buy American provisions, but European capitals are getting impatient with the lack of progress .
Jozef Sikela, the Czech minister who is chairing a meeting of EU trade ministers in Brussels on Friday, said he wanted solutions by the next meeting of a separate bilateral council on trade and technology on 5 december.
“What is important to us is that the United States is aware of our concerns and that the working group must find a solution acceptable to both parties,” he added. “We will focus on getting some solutions in place for the TTC on December 5.”
His comments underline growing concern within the EU over the scale of the US subsidy program and fears that failure to secure better terms for the EU could lead to a serious dispute at a time when two parties must prioritize transatlantic unity against Russia invasion of ukraine.
Liesje Schreinemacher, Trade Minister of the Netherlands, called the IRA “very worrying”, adding: “I want to avoid a trade war by all means. Nobody benefits from a trade war.
The IRA offers tax credits and grants to American consumers and businesses for products such as electric vehicles, wind turbines and green hydrogen, as the United States tries to reduce its carbon emissions while creating jobs. Most are only available for products primarily made in the United States.
It will come into force on January 1, but several European companies have 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 additional pull factor.
Valdis Dombrovskis, European Commissioner for Trade, said the TTC meeting would provide “a good moment to take stock of the progress of the working group 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 “buy European” subsidy scheme. German Economy Minister Robert Habeck also suggested an increase in subsidies.
Elisabeth Borne, French Prime Minister, spoke on Friday with Olaf Scholz, German Chancellor, in Berlin. She told reporters that the EU would “steer investments towards energy transformation”. The two countries “are completely in agreement on the use of European tools. . . and to focus on new technologies so that they can be implemented more quickly and with less bureaucracy”.
Dombrovskis warned that “subsidy races tend to be costly and inefficient” after the meeting of trade ministers. He added that the bloc was providing large subsidies to green the economy “but it is essential that we provide them in a more targeted and effective way”.
Leo Varadkar, Irish Deputy Prime Minister, said: “No one wants to get into a tit for tat race or a grant race, but what the United States has done is really not in line with the principles of the free trade and fair competition.”
But other smaller, more liberal states, such as the Netherlands and Sweden, have warned of a subsidy race or discriminatory regime that could lead to retaliation from other trading partners.
Additional reporting by Guy Chazan in Berlin