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Threatening trade conflict with the USA: Von der Leyen wants to relax EU investment rules

2022-12-04T20:09:11.788Z


US President Joe Biden is fighting inflation in his country with subsidies worth billions. In response to this, the President of the EU Commission has now announced that she will strengthen European investment policy.


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Ursula von der Leyen: »Club for Critical Raw Materials« with the USA?

Photo:

Maxwell Photography / dpa

In order to feed its inflation-plagued economy, the USA has launched a multi-billion dollar renewable energy aid program – linked to domestic production.

According to EU Commission President Ursula von der Leyen, this program now requires a change of course in investment policy in Europe.

In order to cushion competitive disadvantages, the EU regulations for public investments must be relaxed, said the Christian Democrat in a speech at the College of Europe in Bruges.

It also needed to reassess the need for European funding to promote clean technologies and continue working with the US to address some "of the most worrying aspects" of the US investment program.

Federal Economics Minister Robert Habeck had previously announced a “robust response” from the European Union to the subsidies.

Investments of around 370 billion dollars

The US program, part of the Inflation Reduction Act, is a roughly $370 billion investment plan to build a new industrial ecosystem in strategic clean energy sectors .

Among other things, it is about subsidies and tax credits for electric cars and batteries "Made in the USA".

The plans have already been passed by the US Congress.

Because of the protectionist plans, there are concerns in the European Union that companies from Europe will migrate to the USA – or at least move a large part of their production there in order to remain competitive in the USA.

"As a consumer in the United States, you get a tax break when you buy electric vehicles if the vehicles are manufactured in North America," von der Leyen said in Bruges.

"And if you're a manufacturer of batteries for these same electric vehicles, you get a tax break if you produce in the US." This means that an automaker has a double advantage if it manufactures in North America and buys parts in the USA.

In addition, this could also pull critical components and raw materials into the US and from the transatlantic supply chains.

"We are already seeing how this could affect Europe's own clean technology base as well, by redirecting investment flows," von der Leyen warned.

In this competition, however, the same competitive conditions would have to prevail.

Von der Leyen did not say in the speech how much additional money the EU should provide to make this possible.

Specifically, however, she suggested expanding the existing REPowerEU program first.

In particular, this enables investments in energy efficiency, in renewable energies and in the infrastructure of the Energy Union.

In the medium term, money for upstream research, innovations and strategic projects should then be made available via the sovereignty fund she is proposing.

"A common European industrial policy requires common European funding," she said.

With a view to cooperation with the USA, von der Leyen proposed, among other things, the founding of a »Club for Critical Raw Materials«.

The production and processing of certain critical raw materials are now controlled by China, she said.

Working with partners and allies in sourcing, production and processing could make it possible to break this monopoly.

On the possible adjustment of public investment rules, von der Leyen said the US investment program should make one think about how to improve the state aid framework and adapt it to a new global environment.

Attention is currently being paid to avoiding distortions in the EU internal market, but it is now necessary to respond to increasing global competition for clean technologies.

Trade and Technology Council to deliberate on Monday

It is now eagerly awaited how the EU countries will react to von der Leyen's proposals.

The federal government has repeatedly emphasized that it currently sees no need for new pan-European investment programs.

The head of the Trade Committee in the EU Parliament, Bernd Lange, no longer expects a negotiated solution.

Instead, he called for the United States to be sued at the World Trade Organization (WTO) for its subsidy policy.

"This will make it clear to us that the US approach is clearly not compatible with WTO regulations," the SPD politician told the newspapers of the Funke media group.

The Europe-US Trade and Technology Council meets on Monday, with representatives from Europe and the US discussing the concerns.

apr/dpa

Source: spiegel

All business articles on 2022-12-04

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