The EU is demanding a swift response to Joe Biden’s $369 billion green grant package

EU ministers say time is running out to resolve the deepening dispute with the US over Washington’s $369 billion in green subsidies as they try to avert a transatlantic trade war.

Brussels and Washington have set up a task force to address the impact of the Inflation Reduction Act (IRA) and its “buy American” provisions, but European capitals are growing impatient with the lack of progress.

Jozef Sikela, the Czech minister chairing a meeting of EU trade ministers in Brussels on Friday, said he wanted solutions by the next meeting of a separate bilateral Trade and Technology Council on December 5.

“What matters to us is that the US is aware of our concerns and that the task force should work out a solution that is acceptable to both sides,” he added. “We will focus on having certain fixes for the TTC on December 5.”

His remarks underline growing concerns in the EU about the size of the US subsidy scheme and concerns that the lack of better terms for the EU could lead to a serious dispute at a time when both sides must prioritize transatlantic unity in the face of the Russian invasion of Ukraine.

Liesje Schreinemacher, the Dutch trade minister, described the IRA as “very worrying” and added: “I want to avoid a trade war anyway. No one benefits from a trade war.”

The IRA offers tax credits and subsidies to US consumers and businesses for products such as electric vehicles, wind turbines and green hydrogen as the US tries to reduce its carbon emissions while creating jobs. Most are only available for products that are largely made in the US.

It will take effect on January 1, but several EU companies have already said they will choose the US over the EU for their next investment. Energy prices are much lower in the US, adding another pull factor.

Valdis Dombrovskis, EU trade commissioner, said the TTC meeting would be “a good time to take stock of how the task force is doing and then decide what the next steps are”.

Some EU members, such as France, have called on Brussels to replicate US law with its own “Buy European” subsidy regime. German economy minister Robert Habeck has also proposed increased subsidies.

Even Ireland, one of the US’s staunchest allies in the EU, warned of consequences if a swift solution is not forthcoming. Leo Varadkar, Deputy Prime Minister, said: “There will be a response from the EU. No one wants to get into a tit-for-tat or subsidy race, but what the US has done is really inconsistent with the principles of free trade and fair competition.”

But other smaller and more liberal states such as the Netherlands and Sweden have warned of a subsidy race or a discriminatory regime that could lead to retaliation from other trading partners.

Leave a Comment