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WASHINGTON — In a meeting with Treasury Secretary Janet L. Yellen in Bali, Indonesia last month, French Finance Minister Bruno Le Maire raised objections to the Biden administration’s plan to bolster the US clean energy industry through subsidies and other preferential treatment for US automakers that make electric vehicles.
Le Maire said France, a key US ally, viewed the policy as a protectionist measure that would benefit the United States at the expense of his country’s economy and auto industry. He was not alone in his concerns.
President Biden’s “Made in America” plan has fueled anger across Europe at a critical time as the United States tries to keep its Western allies aligned against Russia’s war in Ukraine. Allies who are essential to supporting Mr. Biden in this fight increasingly accuse the United States of undermining them at the expense of national priorities.
Those frustrations clouded what had been a transatlantic effort to starve President Vladimir V. Putin of the oil revenue needed to fuel his war in Ukraine. A looming European ban on Russian oil has prompted the Biden administration to push for a workaround that would allow its critical supplies to continue flowing to prevent a spike in global oil prices. European officials reluctantly agreed earlier this year to adopt a US plan that would put a cap on what Russia could earn for each barrel sold.
But determining that price has split the European Union, leaving the issue in limbo just days before the embargo takes effect. A U.S. official on Wednesday pushed back against lower price cap proposals that some European countries have put forward and argued that a cap that sits between $60 and $70 a barrel would represent a significant reduction in Russian revenue. The Group of 7 nations are expected to finalize a cap on the price of Russian oil ahead of a December 5 ban by the European Union.
Frustration with the United States has been mounting since this summer, when Mr Biden signed two bills aimed at boosting American industry. The Inflation Reduction Act, a sprawling climate and energy law, offers incentives to support the U.S. electric vehicle industry and the CHIPS Act contains $52 billion in grants and tax credits for any global chipmaker that chooses to create new operations or expand existing ones around the world. United States. In particular, European officials see the Cut Inflation Act as a disadvantage to their domestic companies.
Responding to these concerns and understanding the intent of the law is important “so that we keep very strong ties between France, Europe and the United States”, Mr. Le Maire told Ms. Yellen before the meeting of the Group of 20 last month in Bali.
The brewing transatlantic struggle is expected to be a central topic of discussion on Thursday, when French President Emmanuel Macron visits the White House for the first state dinner of Mr Biden’s presidency.
Much of the concern among Europeans centers on the “Made in America” approach which gives preferential subsidies to electric vehicles assembled in the United States and using battery components made in North America. During a visit to the Library of Congress in Washington on Wednesday, Mr Macron told lawmakers the Cut Inflation Act was “super aggressive” against European businesses, according to an official who spoke as anonymous to describe a private conversation.
Mr Macron aired his grievances in an interview on ABC’s Good Morning America broadcast on Thursday. “The CHIPS Act and the Inflation Reduction Act are both very good for the US economy, but since they were not properly coordinated with European economies, they create an absence of a level playing field” , Mr. Macron said.
Mr Biden is expected to try to assuage France’s concerns on Thursday when he meets Mr Macron. But it is unclear whether the Inflation Reduction Act can be changed in a way that will calm the backlash. Senior U.S. officials have defended the policy, arguing that incentives to encourage domestic battery production are a matter of economic security that will ultimately benefit U.S. allies.
“It’s reasonably user-friendly,” Ms Yellen said of the legislation at the New York Times’ DealBook Summit on Wednesday. “We are heavily dependent on China for most of the minerals that go into making batteries, and the purpose of the Cut Inflation Act is to have more adequate supply chains among our friends, our business partners.”
John Podesta, the White House’s senior adviser on clean energy innovation and implementation, said this week that the United States is confident the Cut Inflation Act violates no rules of the World organization of commerce.
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“We intend to implement these arrangements and look forward to dialogue,” Podesta added. “But we believe that not only will these be drivers of the U.S. economy, but ultimately they will have huge benefits across the world as we drive down the price of clean energy and clean energy technologies.
The electric vehicle subsidy debate will be one of the most contentious issues on the agenda as the US and European governments hold their latest round of economic meetings under a framework called the Trade Council and technology, starting December 5 in Washington.
The United States and the European Union set up a task force in October to discuss their split over the supply of electric vehicles. European officials have urged the United States to make some kind of change to the law to ensure that European manufacturers can enjoy the same benefits given to producers in Canada and Mexico, whose products are also eligible for the credit. tax.
European business leaders say they would have preferred these conversations to take place before the law was passed.
Markus J. Beyrer, the chief executive of BusinessEurope, a group representing businesses in 35 European countries, said Europeans were disappointed with the policy, “which discriminates against European production in a very important area without it having been mentioned in the TTC”
“We have a common responsibility to find a solution so that this problem does not poison the relationship,” he said.
Administration officials have encouraged European leaders to join the United States in adopting more measures to boost its advanced manufacturing, as part of a concerted fight against China.
Officials “think there’s room here for Europe and others, frankly, to take similar steps,” a senior administration official told reporters this week during a briefing on the visit of Mr. Macron. The task force, the official said, enabled conversations with Europe “to make sure that their approach and our approach end up complementing each other, harmonizing with each other.”
In talks with Europeans, the Biden administration has focused on other benefits of new climate legislation for global businesses and the need for cooperation to tackle climate change, people familiar with the talks said. .
Privately, US officials have also pointed to recent situations in which Europeans have taken protectionist trade positions that have angered other countries – such as the EU’s carbon border adjustment mechanism or a proposed digital tax.
The Europeans are “much more protectionist and restrictive than the United States,” said Clyde Prestowitz, a labor economist and former trade negotiator for the United States. “There is simply no comparison.”
The split over the auto industry comes as the United States is also asking for Europe’s help in limiting the types of advanced technologies China can access globally, especially semi-production machinery. -advanced conductors marketed globally by the Dutch company ASML.
Senior US officials have traveled to Europe in recent weeks to urge European officials and business leaders to join the United States in severely restricting exports of semiconductor technology to China, arguing that access of China to this technology poses a threat to national security.
When meeting with Mr. Le Maire at the Group of 20 summit in Bali last month, Ms. Yellen noted that America’s relationship with France is critical at such a crucial time for the global economy. She said she was willing to hear Europeans’ concerns about the Cut Inflation Act and try to address them, if possible, within the confines of the law passed by Congress.
“France is America’s oldest friend and ally, and we look forward to continuing to strengthen our very strong relationship,” Ms. Yellen said.
Zolan Kanno-Youngs contributed report.
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