WASHINGTON – President Biden’s efforts to boost domestic manufacturing are facing a wave of diplomacy from key allies, with European governments accusing his administration of undercutting the trans-Atlantic alliance. Atlantic Ocean with “Make in America” policies that threaten their economy.
Opposition centered on the policies contained in the Inflation Reduction Act, which aimed to make the United States less dependent on foreign suppliers by providing financial incentives to locate factories and products. goods in the United States, including electric vehicles. Mr. Biden has seen the law as key to creating “tens of thousands of high-paying and clean energy jobs, solar plants in the Midwest and South, wind farms across our plains and offshore, clean hydrogen projects – across America, every part of America. “
But that has prompted foreign officials to speak out against protectionism and alleges that the Biden administration is breaking trade laws by giving preferential treatment to US-based companies.
Valdis Dombrovskis, the European Union’s trade commissioner, told reporters in Washington on Thursday: “We are concerned that some of the provisions are discriminatory against EU companies, this Obviously a problem for us.
The disagreement represents the first major rift between the United States and Europe since Mr. Biden took office last year. The president, who has promised softer diplomacy than the Trump administration has done with its “America First” agenda, has worked closely with European allies on a number of priorities. First, including punishing Russia for its invasion of Ukraine. During his first months in office, Mr. Biden quickly moved to repair relations with Europe, including resolving 17 years of dispute exceed airline subsidies.
But the united front between the United States and Europe showed signs of strain during the annual meetings of the World Bank and the International Monetary Fund this week. European officials complained to the highest levels of the Biden administration that provisions in an expanded energy and climate law aimed at supporting domestic electric vehicle production violate international trade rules that require States must treat foreign and domestic companies equally. They argue that these regulations are unfair to their domestic car industry.
Mr. Dombrovskis said that he and other European officials would direct their concerns to Finance Minister Janet L. Yellen, whose body is responsible for enforcing much of the law, along with Katherine Tai, the trade representative. commerce, and Gina Raimondo, commerce. Secretary.
During a meeting with Mr. Dombrovskis on Thursday, Ms. Tai “shared her view that taking the climate crisis seriously will require increased investment in clean energy technologies”, Van said. Office of the United States Trade Representative said in a statement. Both Ms. Tai and Mr. Dombrovskis “requested their group to increase engagement” on the issue.
European officials are discussing whether to oppose legislation passed by Democrats along party lines, at the World Trade Organization, which could be time consuming and fruitless, or political raised the issue through the Trade and Technology Council established last year. .
The crux of the international battle centered on a tax credit of more than $50 billion to entice Americans to buy electric cars. The law restricts credit to vehicles assembled in North America. It also has strict requirements around the components that power electric vehicles, including the batteries, and the key minerals used to make them. That is creating new impetus for battery manufacturers to build recycling and manufacturing facilities in the United States.
Foreign companies that manufacture cars and auto parts in the United States may also be eligible for the credit. But some foreign automakers, especially from Asia, tend to import more components for electric vehicles from outside the USwhich means fewer of their models qualify.
That has raised accusations that the provisions of the law were written to benefit US companies like General Motors or Ford, not foreign companies like Toyota and Honda, although many Foreign companies have invested heavily in the United States.
“We understand that some trading partners have concerns about how the EV tax credit provisions in the law will work in practice,” said Eduardo Maia Silva, a spokesman for the National Security Council. their manufacturers. “We are committed to working with our partners to better understand their concerns and keep channels of communication open on these issues.”
European officials fear that the US law will create ties between European companies and their home countries if automakers like Porsche come under pressure to set up shop in the United States. instead of opening more factories in Germany. Since the law came into force, Honda’s motobike, Toyota and South Korea’s LG Energy Solutions have both announced major investments in the battery sector in the United States.
The previous version of the bill would only provide tax credits for US-made vehicles. But Canada and Mexico both lobbying against that draft version, and the measure was eventually extended to apply to vehicles manufactured throughout North America.
Asian allies have also expressed concern about the law.
When Vice President Kamala Harris meeting Korean leaders in Tokyo and Seoul last month, the allies did not hesitate to express their disappointment.
Hours before Ms. Harris attended the funeral of former Japanese Prime Minister Shinzo Abe, South Korean officials, including Prime Minister Han Duck-soo, expressed concerns about the law to the vice president during a meeting. private.
Japanese government also expressed concerns.
Frank Aum, a senior fellow on Northeast Asia at the American Institute for Peace, said the tax credit is a “direct harm” to South Korean companies such as Hyundai and Kia that will not benefit from the credit. tax use.
“South Korea is feeling betrayed a lot because of the investments it has made in electric vehicle batteries and semiconductors in the US over the past few years,” he said.
Just months before he signed it into law, Mr. Biden stood with the Hyundai president in Seoul to celebrate the Korean company’s investment in a new battery and electric vehicle manufacturing facility in Savannah, Ga. President Yoon of Korea in SeoulMs. Harris said she would consult with South Korea when the law is implemented.
In the past, the Biden administration has complained about policies by the European Union and other governments that benefit their domestic companies at the expense of foreign companies – including regulations. Digital regulation has diminished the power of major American technology companies. With the electric vehicle tax credit, Biden administration officials have eased tensions with Europe, focusing instead on the scale of investment in green energy.
Trade experts warn that the US efforts are likely to unleash a wave of similar protectionist measures to match those already imposed by the US.
Bruno Le Maire, France’s finance minister, last month said the European Union should consider offering electric vehicle bonuses to cars made in the EU and that meet strict environmental standards.
In that case, the US could be counterproductive in the long run, if American cars or components face similar barriers to being sold in Europe or Asia.
“I think the risk for the US side is that if we don’t address some of their major concerns, they end up having them,” said Chad P. Bown, a senior fellow at the Peterson Institute for International Economics. will also do the same thing. .
Wally Adeyemo, Deputy Treasury Secretary, said at an event this week that he hopes that ultimately America’s allies will benefit from US investment in the production of goods such as vital minerals because it will also strengthen their supply chain.
