The German and French Economy Ministers travel to the US to defend European companies

German Minister for the Economy and Climate Protection Robert Habeck and French Minister for the Economy Bruno Le Maire will travel to Washington today to work for European industry for 2 days.

relations between Berlin and Paris; It is striking that Germany and France have joined in the objective of reducing the effects of US incentives on European companies and investments, while the lack of coordination in defense projects is tense due to the consequences of the Russia-Ukraine war and the crisis energy in Europe.

European ministers will meet with White House officials tomorrow to enhance cooperation and highlight their concerns about the Reduced Inflation Act signed by US President Joe Biden in August, which includes comprehensive health, weather and tax regulations aimed at reduce inflation in the US

BRUSSELS CONCERNED

According to the German business newspaper Handelsblatt, the two ministers’ trip is received with skepticism in Brussels. It is claimed that there are doubts as to whether the ministers of the two most influential EU member states consider the interests of the whole EU or their own economies.

The EU is concerned that the new regulation, which makes tax cuts contingent on US-produced content, will disadvantage European car companies and manufacturers in the green economy, including batteries and equipment of renewable energy.

While the Washington administration is making the biggest investment in its history in climate and energy with the law in question, there are concerns in Germany and France, which have the largest economies in Europe, that the law will encourage companies in the continent to shift their production to the United States.

The US inflation reduction bill, which aims to challenge China’s dominance of green technology, especially solar panels, was conditional on local production. The package, which includes hundreds of billions of dollars in subsidies for green technology, aims to support investment in everything in the US, from electric car makers to renewable energy makers.

While the US wants to bolster domestic production in clean energy technologies and increase employment in the industry with the $430 billion bill, billed as the largest “climate package” in US history, US incentives provided for in the law also carry the risk of escalating the conflict with the EU.

Canada and Mexico are exempt from the law in the United States. The EU also requires the exemption of the US for its own companies under this law. On this issue, the EU and US parties continue negotiations.

Furthermore, the European industry is concerned that a law providing tax breaks for every eligible component produced in a US factory would destroy potential investment on the continent.

The law establishes a tax deduction of 30 percent of the cost of new or renovated factories that produce renewable energy components.

While Washington’s incentives in this area are worrying Paris and Berlin, there is growing fear in the EU that the law will encourage European companies, especially German ones, to shift production to the US. Rising energy prices, inflation concerns and staff shortages fuel these fears in Europe.

THE LAW MAY PUT THE EUROPEAN INDUSTRY IN DANGER

While it is assessed that the Reducing Inflation Act may make the US more attractive with low energy costs, it is noteworthy that senior business executives in Europe see the law as a “wake-up call” for the EU.

The protectionist US economic and trade policy, which caused concern during the term of former US President Donald Trump, continues into the Biden era. Biden emphasizes “domestic production” at every opportunity.

In some quarters, the Inflation Reduction Act is perceived as a “major industrial policy offensive” rather than addressing inflation, but instead is about strengthening future industries such as weather protection and battery manufacturing.

EU PLAN

For Europe, which is going through a difficult period with the energy crisis, high inflation and possible recession, the backwardness of the industry appears as a fundamental risk.

In Europe there is concern about the industrial and economic recession that will leave the world economy in the hands of the US and China. It looks for ways to reindustrialize Europe to remain a global economic power. Seeing the US incentives as an attack on its own economy, Europe is trying to find a response. To do this, French President Emmanuel Macron and his government are promoting a European economic policy that includes more state aid and new EU funds.

President Macron, by stating that they need a law “like the American ones”, draws attention to the “risk of de-industrialization” of Europe with US incentives.

In the letter sent by Paris to the EU countries on January 9, a comprehensive “Made in Europe” strategy is recommended, and even calls for an agreement on European production targets in key sectors.

EUROPEAN INDUSTRIAL PLAN FOR GREEN RECONCILIATION

Ursula von der Leyen, President of the EU Commission, presented the European Green Deal Industry Plan, which they prepared to increase the competitiveness of European industry in the field of net zero emissions and support climate-friendly transformation , at a press conference in Brussels on February 1st.

Von der Leyen stated that the plan includes relaxing EU public support rules, redirecting existing EU funds, speeding up approvals for green projects, funneling employee skills into these areas, and making new trade deals to ensure the security of supply of critical raw materials. he wanted to be an important part of the net zero industry.

Some EU countries want the Union to set up a new fund by jointly borrowing and supporting countries’ clean industries with it. 10 countries, including Germany, think that existing EU funds should be transferred to the field of green industry and a new funding mechanism should not be established.

The leaders of the 27 EU member states will hold a summit in Brussels on February 9 and 10, where this issue will also be discussed. (AA)