US subsidies: Europe raises its voice against US protectionism

Several European leaders have raised their voices against the massive subsidies given by the United States to companies on their soil.
Achats Thierry Breton

A new trade dispute is brewing over the Atlantic: several European leaders raised their voices on Monday against the massive subsidies granted by the United States to companies on their soil, threatening to sue at the WTO.

At the origin of the rising tensions between the two great Western powers, the implementation this summer of the “Inflation Reduction Act”, the largest investment ever decided in the fight against climate change, providing 370 billion dollars for the construction of wind turbines, solar panels and electric vehicles.

One measure is the focus of criticism: a tax credit of up to $7,500 for the purchase of an electric vehicle from a North American factory with a locally manufactured battery, thus excluding cars produced in the EU.

This plan is a source of irritation for Europe, which accuses it of organizing exceptional subsidies for companies producing on American soil, which it says is totally contrary to the rules of international trade.

One after another, several of its leaders came to the fore again on Monday after weeks of criticism, even threatening legal action.

“We will obviously consider retaliatory measures,” said Thierry Breton, European Commissioner for the Internal Market, during an interview on BFM Business, raising the possibility of going “before the WTO” to make the European arguments if Washington remains deaf to the EU’s recriminations.

A joint “working group” between the EU and the United States will initially attempt to address European concerns.

In recent weeks, the risk of a “trade war” between the two allied regions has been mentioned in no uncertain terms.

French Economy Minister Bruno Le Maire used the term during a visit to Berlin in October, while calling for it to be avoided, and German Chancellor Olaf Scholz spoke of the risk of a “huge tariff war.

Other trade disputes

The trade war is not new to relations between the United States and the European Union, which have had to settle several disputes in recent years.

Among them, the face-off between the European aeronautics giant Airbus and the American Boeing, again against a backdrop of subsidies, and the imposition of additional tariffs by the Trump administration on steel and aluminum.

“The historical irritants are barely appeased that Washington adopts very offensive measures,” commented to AFP Elvire Fabry, expert in geopolitics of trade at the European Institute Jacques Delors.

Politically, however, the latter sees the Biden administration’s measures more as “a domestic agenda to protect U.S. interests” than as a “declared tariff war” as under the Trump era.

In any case, “there is no time to lose for the Europeans, we are a little more than three months after their implementation and there have been no encouraging signals of commitment from the United States beyond friendly explanations,” according to her.

The subject is of even greater concern to European states as the recession threatens to hit the continent next year due to the economic consequences of the war in Ukraine. Energy prices are soaring, making many companies vulnerable.

“The amount of subsidies that the Biden administration is proposing is four to ten times the maximum amount allowed by the European Commission” in some cases, criticized Bruno Le Maire on Monday, who called in an interview given to several European newspapers for a “coordinated, united and strong” response.

According to him, “10 billion investments and thousands of industrial jobs” are at stake.

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