Europe threatens trade retaliation over electric vehicle subsidies in Biden bill – Washington Examiner

by admin on October 28, 2022

European Unionleaders are threatening trade retaliation over provisions in the Democrats’ Inflation Reduction Act subsidizing electric vehicle purchases that are meant to reshore production.

The law requires electric vehicles to be assembled in North America to qualify for tax credits of up to $7,500 per electric vehicle and will institute strict sourcing requirements for battery components in 2024. Those provisions, included at the insistence of Sen. Joe Manchin (D-WV), are meant to boost domestic manufacturing.

Yet they place competitors at a disadvantage, and have led to complaints from allies and trade partners — especially South Korea — and now top European officials are threatening countermeasures.

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German Chancellor Olaf Scholz and French President Emmanuel Macron discussed responding to the legislation during a lunch meeting in Paris Wednesday. “[Scholz and I] have a real convergence to move forward on the topic, we had a very good conversation,” Macron told reporters, according to a report from Politico Europe.

“We need a Buy European Act like the Americans, we need to reserve [our subsidies] for our European manufacturers,” Macron told the news outlet France 2. “You have China that is protecting its industry, the U.S. that is protecting its industry, and Europe that is an open house.”

The European Union’s “concerns are completely valid. In my mind, there’s no doubt at all,” said Gary Clyde Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics. “And if the shoe was on the other foot, you know, the U.S. would certainly — rightly — complain. “

The U.S. and EU announced Wednesday that they will launch a joint task force beginning next week to discuss the new law.

White House NSC spokeswoman Adrienne Watson said in a statement that the task force will allow both sides to “[promote] deeper understanding” on “opportunities and concerns for EU producers.”

European Commission Vice President Margrethe Vestager said earlier this week that the Inflation Reduction Act and tax incentives pose a great risk to some of Europe’s businesses.

“We consider this a very important question. Because it is not just a question of some individual businesses also benefiting from the subsidies that are enabled by the Inflation Reduction Act,” she said Wednesday, speaking before the European Parliament.

If the two sides do not see eye-to-eye, the EU could file a formal complaint against the U.S. with the World Trade Organization, though it is a lengthy process unlikely to provide them any sort of remedy and would almost certainly be appealed by the U.S.

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Still, the Biden administration’s ability to address trade partners’ complaints is limited under the law.

“I’ve heard a lot about the concerns of the Koreans and Europeans about those rules, and we’ll certainly take them into account,” Secretary of the Treasury Janet Yellen said this week. But “the legislation is what it is” and the Treasury “[has] to implement the law that was written.”

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