Plenty of pomp and more than a little symbolism will accompany Emmanuel Macron’s trip to Washington this week for Joe Biden’s first state visit as US president. This will be an opportunity to salute the unexpected unity that American and European partners have achieved this year during Russia’s war against Ukraine. Still, the French leader will arrive with a shopping list of concerns, shared across the EU, about US trade measures, including green subsidies and restrictions on semiconductor exports to China. Unless these issues can be resolved – and a more cooperative economic partnership forged – hard-earned solidarity with Ukraine could suffer.
America’s passage of its $369 billion climate bill, misnamed the Cut Inflation Act, in August was in many ways a welcome moment for European allies. Here, the world’s largest carbon emitter has not only embraced the green transition, but pledged to subsidize it at scale. But EU officials are concerned that rules on subsidies for green technologies, including electric vehicles, contain discriminatory requirements on domestic content. These, they say, could unfairly incentivize EU companies to relocate to the US and break global trade rules. Officials are also unhappy about the potential impact on European companies of US export controls aimed at preventing China from acquiring advanced semiconductor technologies.
Seen from across the Atlantic, the United States is embracing protectionist tendencies that run counter to US Treasury Secretary Janet Yellen’s call for the “friendly conservation” of supply chains to trusted partners. Moreover, they occur just as the EU is at a considerable competitive disadvantage due to Vladimir Putin’s cut on energy supplies. With fuel prices much lower in the United States, politicians fear that European and international companies will shift their operations and investments; BASF, the German chemical group, said last month that it would have to cut its workforce “permanently” in Europe, after opening a new factory in China. The French president accused American energy producers of making “superprofits” by increasing their sales to Europe.
The EU must recognize the political constraints facing Biden and the Democratic Party, from the need to keep American unions on board the green transition to the fight to push their legislative agenda through Congress with a slim majority in the Senate. . He is also expected to show sympathy for the US preoccupation with preventing China from acquiring advanced military technology – especially after Germany, Italy and others mistakenly allowed themselves to become economically overly dependent on China. Putin’s Russia. But the United States, as the leader of the Western alliance, must also find solutions that prevent trade disputes from souring transatlantic relations.
Ideally, the United States should accede to the EU’s request and offer it the same preferential conditions on electric vehicles as those granted to Canada and Mexico. However, since it is impossible to send the legislation back to Congress, the White House should at least try to use implementing rules to reduce its discriminatory effects. It is also possible to clarify and mitigate the effect of semiconductor export controls, not least because if the United States is serious about creating its own chip supply chains, it will need certain technologies Europeans.
There are echoes of the 1950s in America’s efforts to assemble a coalition of democracies for a new Cold War, where it confronts not just a belligerent Russia but an ever more assertive China. Now, as then, these efforts should involve close coordination between allied economies, but trade disputes are a corrosive distraction. Macron’s visit to Biden cannot hope to solve these problems. But if it contributes to a better understanding on both sides of what is at stake, it will have served an important purpose.
