The US Inflation Reduction Act, which provides massive subsidies to US businesses, threatens Europe with deindustrialization, French President Emmanuel Macron said on Thursday.
"Europe is going through a difficult period because of the war (in Ukraine) and also because of the trade decisions made by our colleagues in the United States," Macron said at a joint press conference with Spanish Prime Minister Pedro Sanchez in Barcelona, broadcast by the Elysee on Twitter.
EN DIRECT | Conférence de presse conjointe du Président @EmmanuelMacron et du Président du Gouvernement d’Espagne Pedro Sánchez. https://t.co/k7FR5z2pZ7
— Élysée (@Elysee) January 19, 2023
"If Europe does not respond, accelerating the 'greening' of the US economy will mean the deindustrialization of Europe." The two leaders agreed that Europe should take a "voluntaristic" approach to this issue.
In December 2022, Macron said the US and France agreed to re-synchronize their approaches to address serious trade concerns European partners have expressed over the IRA. He called the US law "unfriendly" and "aggressive," saying Europe needed to speed up work on own business support initiatives. Macron suggested that Europe might come up with an appropriate response to the IRA by early 2023.
The IRA, signed into law by US President Joe Biden in August 2022, unlocks $369 billion in tax credits and subsidies for US consumers and companies making green tech products in the country starting January 2023. Several EU companies reportedly said they would invest in the US rather than the EU, with rising energy prices at home being a crucial factor.
Concerns have been rising in Europe that the US tax credit plan could kick off a subsidy race between the transatlantic allies at a time when they want to show unity in the face of the Ukraine conflict.
Europe is struggling to find ways to defend itself against US protectionism
On December,5, 2022, The French media LeMonde ran the article 'Europe is struggling to find ways to defend itself against US protectionism'. The US' Inflation Reduction Act, which aims to curb inflation by reducing the deficit and investing in domestic, clean energy production, is causing great concern in Europe. As a result, the European Commission is seeking ways to fight back.
Although they haven’t yet started hemorrhaging, they may do so in the future. Every day, European manufacturers announce that they are investing in the United States, or that they are considering it. German car manufacturers Volkswagen and BMW recently announced plans to expand their production capacities in the US, and Northvolt may finally open its battery Gigafactory stateside, despite plans to set up in Germany.
Solvay, a chemical company in Belgium, has decided to take part in a major battery project across the Atlantic; currently, French company Saint-Gobain has plans to expand its operations in California; and Iberdrola, the Spanish energy company, plans to invest nearly half of its investment funds in the US over the next few years.
With energy prices, which are three to four times higher in Europe, and President Joe Biden's Inflation Reduction Act (IRA) – a $369 billion package designed to boost America's green industry with tax credits and subsidies earmarked for "Made in America" products – the US is more attractive than ever.
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