Germany, France Back EU Push to Counter U.S. Subsidies

"PARIS -- Germany and France expressed joint support for a European Union effort to push back against tax breaks in the U.S. Inflation Reduction Act, increasing the likelihood that the bloc can agree on simpler European subsidy rules and additional aid for specific sectors next month.

At a meeting in the French capital on Sunday, German Chancellor Olaf Scholz and French President Emmanuel Macron said they had aligned their positions ahead of an expected plan by the bloc's executive body to counter what it sees see as the unfair advantage the U.S.'s legislation gives American companies.

The EU has lobbied the U.S. to rewrite its rules so that European companies can benefit from the tax breaks. If that fails, the bloc's response could range from making it easier for European governments to subsidize their own companies to earmarking EU funding for such investments.

"We want to move forward a European response, with simple, fast, clear tools for our companies," Mr. Macron said, adding that the two leaders agreed on "a common position to move toward ambitious and speedy European action."

Mr. Scholz said the leaders want the bloc's executive arm to compare the available aid in the U.S. under the new law with what already exists in Europe to determine what new aid might be needed.

"I believe that depending on the area, a differentiated approach will be needed," he said.

Officials in Europe worry that "Buy American" provisions attached to the U.S. subsidies would lure European companies away from the EU and hurt the continent's clean-tech and manufacturing industries.

The U.S. said last month that it would adjust its rules to allow some vehicles assembled overseas -- rather than in North America only -- to qualify for the new incentives.

Messrs. Scholz and Macron both said they are optimistic further negotiations with the U.S. can create exemptions to help European companies doing business in the U.S.

"The EU shouldn't be treated worse than Canada or Mexico," Mr. Scholz said.

When it comes to subsidies, the EU plan aims to simplify the bloc's regulatory environment and provide more money for the production of clean technology, European Commission President Ursula Von der Leyen has said.

German officials have expressed skepticism about introducing the EU's own version of the U.S.'s IRA, because it could distort markets and burden highly indebted EU countries." [1]

1. World News: Germany, France Back EU Push to Counter U.S. Subsidies
Schechner, Sam.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 24 Jan 2023: A.7.