France and Germany will fight back against US green tech poaching

France’s and Germany’s economic ministers will request the US to stop making aggressive overtures to European businesses in an effort to attract their green investments across the Atlantic. This was stated by French officials ahead of a Washington visit this week.

On Tuesday, Bruno Le Maire from France and Robert Habeck from Germany will meet with White House officials to express concerns over President Joe Biden’s climate legislation, Inflation Reduction Act. They also hope to push for improved cooperation.

The US $370bn package contains hundreds of billions in green tech subsidies. It aims to boost investment in everything, from electric carmakers to producers of renewable energy. The original purpose of the bill was to challenge China’s dominance in green tech. However, it is predicated on local manufacturing, leading to fears that more businesses looking to invest in Europe might instead choose to go to the US.

The French officials stated that Le Maire, Habeck and Habeck would ask the US to not go beyond this framework and actively try to steal EU businesses. In recent months, representatives of several US economic bodies including Ohio and Michigan toured Europe to promote the incentives.

One French official stated that they are looking for exemptions but also mutual understanding in order to avoid a subsidy race and avoid aggressive tactics such as the US administration visiting European companies to inquire if they would like to move their factories to America. “You don’t do that with friends.”

The second official said that there was enough room for everyone.

Habeck and Le Maire will be meeting Janet Yellen (US Treasury secretary), Katherine Tai (trade representative) and Gina Raimondo (commerce secretary).

EU repeatedly demanded exemptions from the US climate package in order to allow some European businesses to benefit from the subsidy without having to uproot their production. Some manufacturers find this market attractive because of the lower energy costs in the US. They are less exposed to the effects of Russia’s invasion on the global oil and gas markets.

Officials said that the Le Maire and Habeck visits were intended to show unity between France, Germany, and Europe at a time when relations are already strained by Europe’s energy crisis and the fallout of the Ukraine war. However, they will not be able to offer much extra flexibility.

The exemption that has been granted allows electric cars made outside North America to be eligible for tax credits. This could prove to be a significant shift that could help German automakers.

German officials expressed concern that some members of the US Congress might want to reopen the agreement on electric cars. One stated that there have been attempts to reopen the agreement and that they want to emphasize how important it was for them to preserve it.

Habeck and Le Maire hope to convince the US to be more flexible when it comes to the IRA’s local production requirements for critical materials used to make electric cars batteries. Officials from Germany and France said that this is an area where the EU and US have already signed co-operation agreements. They will also demand transparency about the amount of US subsidies given to businesses. This could allow the EU match some of these incentives.

The bloc’s trade policy is generally managed by the European Commission. A German official however noted that it was important for France and Germany to explain to the US from a national perspective the impact that the IRA could have upon us and the challenges it poses.

The EU is currently preparing its response to the US climate program. This includes loosening restrictions on European subsidies and additional funding for green technology businesses.

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