EU ministers say time is running out to resolve the deepening dispute with the United States over Washington’s $369 billion in green subsidies as it seeks to avoid a transatlantic trade war.
Brussels and Washington have set up a task force to deal with the impact of the Inflation Reduction Act (IRA) and its “buy American” provisions, but European capitals are growing impatient with the lack of progress.
Jozef Sikela, the Czech minister who is chairing a meeting of EU trade ministers in Brussels on Friday, said he wanted solutions by the next meeting of a separate bilateral council on trade and technology on 5 december.
“What is important to us is that the United States is aware of our concerns and that the working group must find a solution acceptable to both parties,” he added. “We will focus on getting some solutions in place for the TTC on December 5.”
His comments underline the growing concern within the EU over the scale of the US subsidy program and fears that a failure to secure better terms for the EU could lead to a serious dispute at a time when the both sides must prioritize transatlantic unity in the face of Russia’s invasion of Ukraine.
Liesje Schreinemacher, Dutch Trade Minister, called the IRA “very worrying”, adding: “I want to avoid a trade war by all means. No one profits from a trade war.
The IRA offers tax credits and grants to American consumers and businesses for products such as electric vehicles, wind turbines and green hydrogen as the United States tries to reduce its carbon emissions while creating jobs. Most are only available for products primarily made in the United States.
It will come into force on January 1, but several European companies have already said they would choose the US over the EU for their next investment. Energy prices are much lower in the United States, which adds an additional pull factor.
Valdis Dombrovskis, European Commissioner for Trade, said the TTC meeting would provide “a good moment to take stock of the progress of the working group and then decide on the next steps”.
Some EU members, such as France, have asked Brussels to replicate the US law with its own “Buy European” subsidy scheme. German Economy Minister Robert Habeck also suggested an increase in subsidies.
Even Ireland, one of the US’s staunchest allies in the EU, has warned of consequences with no quick fix. Deputy Prime Minister Leo Varadkar said: “There will be an EU response. is really inconsistent with the principles of free trade and fair competition.
But other smaller, more liberal states, such as the Netherlands and Sweden, have warned of a subsidy race or discriminatory regime that could lead to retaliation from other trading partners.