The EU urges the US to avoid a trade war over aid to its companies

Time is running out to reach a negotiated solution to the conflict posed for Europe by the incentive plan of the United States to accelerate the energy transition, endowed with more than 370,000 million dollars.

Thomas Osborne
Thomas Osborne
25 November 2022 Friday 16:37
11 Reads
The EU urges the US to avoid a trade war over aid to its companies

Time is running out to reach a negotiated solution to the conflict posed for Europe by the incentive plan of the United States to accelerate the energy transition, endowed with more than 370,000 million dollars.

The law will enter into force on January 1 and, although they assure that "now" Washington is aware of the seriousness of the problem, the lack of progress worries European governments, which yesterday urged the United States to propose "as soon as possible" solutions "feasible" and thus avoid a trade war between the two blocs or a costly race for public subsidies.

"This challenge has to be resolved quickly and effectively, it is necessary to avoid a race for subsidies that could greatly disrupt our relationship," defended the Czech Minister of Industry, Josef Sikela, on behalf of the EU presidency. Its winner "can be sitting on another continent, not in Europe or America," he said, referring to China.

The combination of some elements of the new law with the Buy American plan, a classic US protectionist instrument that closes doors to foreign companies, has set off alarm bells on this side of the Atlantic. To a greater or lesser degree, all countries fear that the aid candy, combined with low energy prices in the US, will draw investment away from Europe, cause relocations and accelerate de-industrialization.

The matter was discussed yesterday by EU trade ministers in Brussels in an atmosphere of growing nervousness. "What we ask for is fairness," said European Commission Vice President Valdis Dombrovskis. "We want and hope that European companies and exports will receive the same treatment in the US as US companies and exports in Europe." That is, the same treatment that the Biden Administration has agreed to its partners in Canada and Mexico.

Brussels and Washington have opened channels of dialogue at a technical and political level to address the issue. The key appointment will be the meeting of the Council of Commerce and Technology (TTC, for its acronym in English) that will take place on December 5 in Washington. France is pressing for the EU to draw conclusions and prepare its response based on the results of that meeting. “It is a matter of enormous concern. We are talking about 367,000 million dollars in American subsidies, of which 200,000 million are actually not in accordance with the rules of the World Trade Organization”, denounced the French Trade Minister, Olivier Becht. Paris proposes going to the WTO and asks to consider "coercive or support measures for our own companies on European soil."

Small countries, unable to compete, do not like the idea, but neither do the risks posed by American law. "Nobody wants to get into a subsidy race, but what the US has done is not consistent with the principles of free trade and fair competition," protested Ireland's deputy prime minister, Leo Varadkar. “We cannot wait too long to make a decision. I think we will have to take action very soon," said the Swedish minister, Johan Forssell, concerned about the impact of the American plan, which provides for tax credits of 7.5 billion for the purchase of electric cars made in the US for the industry. European automobile.

Several sources suggest that a possible solution is being worked on within the framework of the TTC. "They have assured us that our concerns are being heard," said Dombrovskis, who advocated not setting deadlines and continuing to work beyond December 5. But "the sooner there are results, the better, especially taking into account the entry into force of the law."

The Spanish government advocates trying to "go hand in hand" with the United States to find a negotiated solution. Entering into a spiral of subsidies "would not be the smartest or most efficient strategy," said Secretary of State for Trade, Xiana Méndez, who warned that "there may be a mutual impoverishment effect" and could "harm third countries that They cannot even consider a competition of this type”.

Trade conflicts between Europe and the United States are nothing new, there have been all kinds of conflicts with Democratic and Republican administrations throughout history. But the current geopolitical context, marked by the war in Ukraine, a conflict for which Europe is suffering greater economic damage than the North American country, makes it hurt more this time and they have been made aware.

Apart from the macro-financial aid sent to Kyiv, “we are the ones who are suffering the most from the effects of the sanctions against Russia, energy prices are clearly higher in Europe than in the United States. This is also part of history”, points out a senior European official. “But, beyond all this, there is recognition by the Americans. Now it is time for that to be translated into more concrete political lines”.