“Simple public support for EU companies” and a “common fund for industrial sovereignty” of the continent. To the Ursula von der LeyenL’Europe it must waste no more time and even look at “simplifying and adapting” its state aid rules so that its industries can compete with America’s. Especially given theAnti-Inflation Act (IRA), the $369 billion “green” investment maxi-plan, coming into effect United States starting next year: an unprecedented “bazooka” of public subsidies for production and consumption to help American industry make the green transition, from solar panels to wind turbines, from green washing machines to electric cars. “The most aggressive measure ever to tackle the climate crisis and strengthen our economic and energy security” – as he defined it Joe Biden – but threatens to torpedo the recovery of EU companies and lure many of them across the ocean.
THE STRATEGY
The President of the European Commission yesterday broke the delay for the first time and clarified what the European response to a strategy that risks undermining transatlantic unity might look like. Von der Leyen entrusted his vision for the future of industrial policy to a speech at the College of Europe in Bruges, the university for higher studies on the EU whose academic year 2022/2023 is named after David Sassoli: a vision that matches most of the recent press France and Germany motivated an in-kind response to the Stars and Stripes subsidies, despite warnings from northern European countries and many members of their own executive branch. According to von der Leyen, the Stars and Stripes plan “has at least three challenging aspects: First, the logic of the ‘Buy American’, i.e. the incentives to buy products made in the USA”, then the tax breaks that could lead to up towards discrimination and finally production support, which can trigger a race for subsidies. The EU will respond appropriately and in a considered manner. But a costly trade war is neither in our interest nor in that of the Americans.” In fact, China needs “a commodities club between Europe and the USA to counteract the Chinese monopoly”.
For the number one of the Berlaymont building, “the new and more assertive industrial policies of our competitors require a structural response on our part”: it starts from changing the rigid framework of state aid rules, one of the pillars of EU law to make capital available to their to support businesses and is taking the form of a new shared funding system. “Europe has set up a very sophisticated system, but today companies want simple and predictable rules – according to von der Leyens. We are very careful to avoid distortions of competition in our internal market, but now we also need to respond to growing global competition.” And as there is a risk that the Anti-Inflation Act “leads to unfair competition and fragments the critical supply chains already damaged by the pandemic been put to the test’, Brussels can initiate ‘a European response’, ie joint investment: ‘While it is important that states have the flexibility to invest in strategic sectors, the approach cannot be autonomous. It would favor those with big pockets and create distortions that would ultimately undermine the single market.”
The framework of the tug-of-war is geopolitical, but the point of fall is in everyday life. For example, some of the IRA’s most iconic measures include tax credits for the purchase of electric vehicles assembled in North America (up to $7,500 for a new, zero-emission car and up to $4,000 for a used vehicle). US-EU negotiators will revisit these profiles today when they meet in Washington for a summit of the bilateral Trade and Technology Council. According to von der Leyen, the path to Europe appears to be clear, but diplomats are still hoping to defuse tensions and launch a series of corrective measures against the IRA before the end of the year, an example of what the United States is already an ally as Canada and Mexico have done.
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