EU warns of factory closures – von der Leyen travels to Washington
Brussels, Washington The EU Commission sees the American Inflation Reduction Act (IRA) as a serious threat to European industry. In an internal paper, Commissioner Thierry Breton’s Internal Market Directorate warns of the risks of the US subsidy program. “The danger of a distortion of the European supply chains is real,” is the conclusion.
This could affect entire supply chains and is particularly worrying for small and medium-sized companies in Europe. The US law provides $369 billion in green technology subsidies over 10 years.
To illustrate the seriousness of the situation, the authors list around 50 companies in energy-intensive sectors that have interrupted, scaled down or stopped their production entirely due to the high energy prices since the Ukraine war. Among them is the steel manufacturer Arcelor Mittal, which reduced its production in Bremen and Hamburg. But also the ceramics manufacturer V&B tiles, which is moving to Turkey.
The Commission also lists a number of companies that have announced investments in the USA. Among them is the Italian energy company Enel, who wants to build a solar cell factory there thanks to the IRA. Norwegian solar company REC Solar is even relocating to the US right away – “because of the unrivaled terms that the IRA offers,” as the authors write.
Of the Leyen wants to limit damage during US visit
Against this background, Commission President Ursula von der Leyen’s visit to Washington on Friday to the delicate mission. The subsidy dispute should not overshadow the visit, but rather wants it CDU-Politician limit the damage caused by the IRA as much as possible. Your most important goal is to advance the planned raw materials partnership with the USA.
The Americans have signaled to the Europeans that they may be willing to treat such an alliance as a free trade agreement. This means that European battery manufacturers could also benefit from US subsidies under IRA regulations.
However, there will be no contract ready for signature on Friday. From the point of view of the EU Commission, it is more about setting up a process that should lead to a raw materials partnership in the medium term. In the meantime, Brussels hopes, a declaration of intent could suffice to obtain the status of a free trade partner.
The relationship between von der Leyen and biden is exceptionally tight. Von der Leyen’s chief of staff, Björn Seibert, also has good contacts in Washington and speaks regularly to Biden’s security adviser, Jake Sullivan. The Commission is taken seriously by the US government – which has rarely been the case until now.
>> Read here: VW is planning a battery cell factory in North America – the loser would be Eastern Europe
This is useful for the IRA negotiations. So the US Treasury Department postponed Janet Yellen the full implementation of the IRA by the end of March in order to be able to negotiate a solution to the dispute. But the US government has repeatedly made it clear that there is little room for correction. Any softening of the planned “Made in America” rules in the IRA will be viewed with suspicion in Congress and US industry.
The powerful US mining associations warn against making concessions to the EU, arguing that foreign automakers could still use loopholes to process minerals from China or Russia. They have a powerful advocate in Democratic Senator Joe Manchin.
Can the US and EU avoid a subsidy race?
The dispute over commodity rules is now spreading widely: This week, Manchin blocked the confirmation of a candidate in the US Senate who was nominated by Biden to head the US tax authority – as a sign of protest. “This administration has ignored the intent of Congress in implementing the IRA at every turn,” Manchin said.
>>Read here: How the EU wants to boost the promotion of domestic raw materials
High EU officials concede that persuading the Americans to make further concessions will not be easy. But time is pressing: an agreement must be reached by the end of the month. SPD-Politician Bernd Lange, chairman of the trade committee in the European Parliament, sees the possible commodity deal as just a “small building block” in an understanding with the USA.
He is concerned about the generous funding of green, i.e. climate-neutral hydrogen, which Washington wants to distribute. “The pressure to relocate is particularly great in this sector,” warns Lange. Europe is in danger of losing promising start-ups.
Von der Leyen and Biden are also likely to talk about this topic. The Commission is particularly concerned with the fact that there is no upper limit for subsidies in the IRA. Brussels is striving for agreements so that Europeans and Americans invest together in climate protection instead of weakening each other. The chip sector, in which it has so far been possible to prevent a damaging subsidy race, is regarded as a role model.
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