France hails ‘breakthrough’ in EU-US dispute over climate law

French Finance Minister Bruno Le Maire said US President Joe Biden’s proposal to fix the provisions of his flagship climate package to help US allies is a “breakthrough” that will help ease European anger at the potential damage to their own cleantech companies.

Le Maire was speaking after French President Emmanuel Macron, during a three-day state visit to Washington, demanded that Biden address the damage caused by the law, known as Inflation Reduction Act could have on the EU. Macron described the $400 billion stimulus to fund the green economy transition in the US as “super aggressive against European companies” and risked “splitting the West” by unfairly distorting competition.

But Macron and the US president has made significant progress in his IRA talks, Le Maire said, and officials will now work closely on the details in the coming weeks.

“I really think the state visit … is a turning point,” he told the Financial Times.

one specific sore spot there have been subsidies for US-made electric vehicles that the EU, South Korea, Japan and the UK have criticized as discriminatory against their companies and in violation of World Trade Organization rules.

Speaking at a joint press conference on Thursday, Biden said he was open to solving EU problems since the US intention was not to damage the region or exclude allies. Rather, the IRA was aimed at expanding U.S. supply chains to reduce reliance on Chinese clean energy and electric vehicle products, he explained.

“We can make some adjustments that will make it much easier for European countries to participate or work independently, but this still needs to be worked on,” Biden said.

Biden mentioned one potential change: reworking a provision in the law that provides exceptions to local production rules to allow subsidies for electric vehicles and renewable energy technologies if the country in question has a free trade agreement with the US.

“This was added by a member of the United States Congress, who admits that he meant only the allies; he did not mean literally the free trade agreement. So there’s a lot we can do.”

Le Maire said such a change would be an important win for Europe and help ensure that the region’s companies remain competitive in the race for a more low-carbon economy.

“It’s a big breakthrough to say: they are our allies, they are our friends, so even if we don’t have a trade agreement with Europe, we will treat the European components in the same way as the components from countries with a trade deal,” he said.

“This is not an adjustment, this is an important political choice” of the Biden administration, he added.

It remains to be seen how such a change will come into effect, given that it is unlikely that the IRA legislation itself will be rediscovered or changed. French officials have suggested that this should be possible through presidential executive orders or ordinances determining how the law should be applied.

On Friday, the White House declined to comment further on the specific changes being considered. “The President has made it clear that there are ways to solve Europe’s problems. This is an issue that we are working through through substantive consultations with our European partners,” the White House spokesman said. “We will not get ahead of this process.”

A task force formed by US and EU officials will continue to meet to resolve issues with the IRA, and the issue will also be addressed at the US-EU Trade and Technology Council meeting on Monday.

Asked if Macron threatened Biden to take the matter to the World Trade Organization, Le Maire said he didn’t need to do so, as the two countries’ strategic goals are the same – to create strong industries using green technologies.

“No one wants a trade war in the situation we are in,” he said, alluding to the war in Ukraine and the economic consequences of rising energy prices.

“We have one competitor – China. The strategic goal of the United States, it seems to me, is not to weaken Europe, but, on the contrary, to work in partnership with Europe.”