The European Union and the US have taken an important step towards each other in the trade dispute over US subsidies for green technologies. US President Joe Biden and European Commission President Ursula von der Leyen announced in a joint statement Friday after a meeting at the White House that they want to “immediately” negotiate minerals for car batteries.
Such an agreement should allow electric vehicles produced in Europe to qualify for US tax credits. The background to the dispute is a US law that provides for multi-billion dollar investments in climate protection and subsidies for US industry. This has led to concerns about competitive disadvantages in the EU. The problem from a European perspective with the so-called Inflation Reduction Act (IRA): Many subsidies and tax credits are linked to the fact that profitable companies use American products or produce them themselves in the US.
Tax benefits as a stumbling block
A stumbling block for Europeans is now tax breaks for electric vehicle buyers. Conditions are attached to these tax benefits. These include requiring a certain percentage – and will increase in coming years – of car battery parts to come from the United States or a country with which the United States has a free trade agreement.
EU manufacturers of electric cars fear major disadvantages in the US market. Because the United States has several free trade agreements – for example, with Canada or Mexico. However, there is no agreement with the European Union.
“Will work on an agreement”
The aim is now to conclude agreements with Brussels in the field of critical minerals. The term free trade agreement is not defined in US climate law. The joint communication from the EU Commission and the White House now speaks of a “targeted agreement”. After the meeting, von der Leyen stressed that it had been agreed to ensure that critical raw materials extracted in the EU have the same access to the US market as if they had been sourced from the US market. “We will work on an agreement on that.”
The Europeans had accused the United States of protectionism because of the law. German Chancellor Olaf Scholz said in January that he welcomed the fact that the US wanted to invest billions in energy and climate protection. However, requirements for certain products must not lead to discrimination against European companies. Representatives from the EU and the US have been working in the background for months to defuse the conflict.
Representatives from the EU and the US have been working in the background for months to defuse the conflict. At its core, the IRA is pursuing a set of goals that the US shares with the European Union, a senior White House official said ahead of the meeting. It is agreed that “historic investments” are needed to meet climate goals. They want to invest in the expansion of clean energy and related jobs and ensure stable supply chains. Appropriate measures are taken “together with allies and partners”. The goal is for both sides to communicate their approaches to the other and not get into a competition.
No shaking the foundations of the law
The law is a major domestic political success for the US president. He had already made it clear in the past that he would not unravel the law again. This means that the focus is now mainly on interpretation space and application questions. Nothing changes in the basic direction of the law. Biden had recently made it clear again and again that he wanted to focus more on favoring the domestic industry.
Source: Krone
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