April 14. 2024. 7:50

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Le Maire, Habeck head to Washington to defend EU interests

French and German Economy Ministers Bruno Le Maire and Robert Habeck will visit Washington on Monday to defend the European Commission’s latest moves to counter the US’ controversial granting of green subsidies through the Inflation Reduction Act (IRA).

Le Maire and Robert Habeck will meet with US Treasury Secretary Janet Yellen, US Trade Representative Katherine Tai and Secretary of Commerce Gina Raimondo.

The IRA is a US $370-billion subsidies and tax break package introduced by the Biden administration late last year, aimed at financing the green transition. A part of the subsidy scheme requires the products to be assembled in the US, thus putting EU companies at a disadvantage – and further pressuring EU industry players to relocate or prioritise investment in the US.

He also insisted that both should adopt a “collaborative approach” on strategic investments, such as semiconductors – wholeheartedly supporting the European Commission’s latest round of state aid relaxation.

Germany’s Habeck equally spoke in favour of tax breaks for investments that are deemed “green” as a potential response to the US subsidy programme, arguing that Europe “must stay, or become again, competitive.”

Ahead of the trip, Habeck showed himself optimistic that a trade war between the EU and the US could be averted. “In theory, we should be able to build a green bridge across the Atlantic in particular when it comes to industrial policy,” he told reporters during a trip to Sweden at the end of last week.

European Commission ready to fight back

The visit comes as the European Commission ramps up its response to the IRA.

On Wednesday (1 February), European Commission President Ursula von der Leyen presented a Green Deal Industrial Plan that aims to “focus on the key technologies for the shift to net-zero”, she told a press conference.

The subsidising of European companies to greater extents than what treaty rules already allow for, and for longer, is at the heart of the Commission’s strategy. This is enshrined in the principle of ‘matching subsidies’, the functioning of which has been made clearer in a Commission’s Communication, leaked to EURACTIV on Friday.

Under this scheme, member states can match the aid amount a European company has been offered by a third country, such as the US – encouraging industry to remain on the Old Continent. Such ‘matching’ was at the heart of a Franco-German “For a European Green Industrial Policy” position paper published in December.

Against this backdrop, the Franco-German joint trip to Washington suggests a thawing of rather cool diplomatic relations, after months of tension. Disagreements between the administrations of French President Emmanuel Macron and German Chancellor Olaf Scholz had abounded on issues such as energy prices, nuclear and European defence matters.

Scholz’s solo trip to China in early November had infuriated French and EU counterparts. “It’s very important that the behaviour of member states towards China […] change in a way that’s more coordinated than individually-driven, as China obviously wants us to be,” the Commission’s industry chief, Thierry Breton said at the time.

Despite Paris and Berlin’s show of harmony on the matter, these discussions will not necessarily be easy: smaller and less financially weighty states are less convinced of loosening national subsidy rules than Habeck and Le Maire are, fearing heavyweights like Germany might outbid them.

An informal meeting of competitiveness ministers is due to take place in Stockholm on Tuesday, during which the Industrial Plan will be discussed. A European Council meeting with heads of state is coming up on 9-10 February.

(Julia Dahm | EURACTIV.de, Théo Bourgery-Gonse | EURACTIV.fr)