Protectionism made in the USA: Dispute over the Inflation Reduction Act IRA

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Chancellor Olaf Scholz has asked the United States to make concessions because of the controversial US investment program worth billions.

Scholz warned in the Bundestag on Wednesday of the disadvantages of the Inflation Reduction Act (IRA).

Federal Economics Minister Robert Habeck (Greens) and his French colleague Bruno Le Maire traveled to Washington for talks, but returned without any concrete commitments on future market access for European companies.

The program envisages investments in climate protection worth billions, but ties many subsidies and tax credits to companies using US products or producing them themselves in the USA - which triggers concerns in Europe about competitive disadvantages.

It should result in CO2 emissions in the USA falling by around 40 percent by 2030 compared to 2005.

In a government statement on the forthcoming EU summit, Scholz said that economic relations with the USA should be further intensified.

"Our ongoing talks about the Inflation Reduction Act are a good starting point for this - at least if the USA does without rules that put European companies at a disadvantage compared to companies from Canada and Mexico, for example."

This will be discussed with the United States.

Subsidy race warning

With the IRA, the USA had rekindled the discussion about an active industrial and location policy for future technologies, said Scholz.

For its part, Europe has the economic prerequisites and the funding instruments to master the climate-neutral transformation of industry.

The EU will take a very close look at whether and where the programs still leave gaps and how they can be closed.

At the same time, Scholz warned: "An uninhibited subsidy race with the USA would certainly be the wrong way."

The USA is the most important sales market for the export-oriented German economy.

Habeck and Le Maire campaigned for a Europe-friendly application of the law.

According to their own statements, they have achieved, above all, commitments for more transparency about the extent of state support in the USA.

Habeck said it was agreed that there was no risk of getting into a subsidy race.

"My understanding and my interpretation of the talks is that there is a great willingness to find forms of cooperation without reopening the IRA."

Working together means bringing the two markets together.

Auto industry, batteries, hydrogen: haggling over the application rules of the IRA

In Europe, there is hope for more favorable application rules for the law that has already been passed, which is currently being worked on in Washington.

In the areas of the automotive industry and batteries, this work is practically complete, but not yet in the case of regulations for hydrogen as an energy source and for important raw materials, according to Habeck.

"So we still have a few months to come to a solution."

Although the EU Commission is conducting the relevant negotiations, they want to support them.

The package was negotiated in a tough process with concessions, subsequent changes are out of the question for US President Joe Biden.

In his State of the Union address on Tuesday evening (local time), Biden made it clear again: "We will make sure that the supply chain for America starts in America. The supply chain starts in America."

This is "completely in line with international trade rules."

In response to the IRA, but also to Chinese subsidies, EU Commission President Ursula von der Leyen recently presented a new green industrial program.

In it, she announced the need to invest hundreds of billions of euros in climate-friendly technologies.

To this end, the authority wants to expand and accelerate access to funding and give the EU states more freedom for targeted subsidies.

The proposals are to be discussed at the EU summit beginning on Thursday.