EU ministers say time is running out to resolve a escalating dispute with the US over Washington’s $369 billion green subsidies as they seek to avert a transatlantic trade war.
Brussels and Washington have set up a task force to consider the implications of the Inflation Reduction Act (IRA) and its “buy America” provisions, but European capitals are growing impatient at the lack of progress.
Josef Sikela, the Czech minister who chairs the EU trade ministers’ meeting in Brussels on Friday, said he wants to find solutions in time for the next meeting of the separate bilateral Trade and Technology Council on 5 December.
“It is important for us that the US is aware of our concerns, and the working group must come up with a solution that is acceptable to both sides,” he added. “We will focus on developing specific solutions for the TTC on December 5th.”
His comments highlight the growing concern in the EU over the scale of the US subsidy scheme and the concern that failure to secure better terms for the EU could lead to a major dispute at a time when both sides need to prioritize transatlantic unity in the face of Russian invasion of Ukraine.
Dutch Minister of Trade Lie Schreinemacher described the IRA as “very worrying”, adding: “I want to avoid a trade war by all means. A trade war benefits no one.”
The IRA provides tax breaks and subsidies to US consumers and businesses on products such as electric cars, wind turbines and green hydrogen as the US tries to cut carbon emissions from job creation. Most of them are only available for products made primarily in the USA.
It goes into effect January 1, but several EU companies have already said they will choose the US over the EU for their next investment. US energy prices are much lower, which is an additional pull factor.
Valdis Dombrovskis, EU trade commissioner, said the TTC meeting would provide “a good time to take stock of how the working group is doing and then decide what the next steps are.”
Some EU members, such as France, have urged Brussels to repeat the US move with its own “Buy European” subsidy regime. German Economics Minister Robert Habeck also proposed an increase in subsidies.
Even Ireland, one of the most staunch US allies in the EU, warned of the consequences without a quick fix. Leo Varadkar, Deputy Prime Minister, said: “The EU will react. Nobody wants to be in a tit-for-tat race or a subsidy race, but what the US has done is not really in line with the principles of free trade and fair competition.”
But other smaller, more liberal states, such as the Netherlands and Sweden, warn against a subsidy race or a discriminatory regime that could provoke retaliation from other trading partners.