The economic confrontation between the United States and China has put Europe in the crosshairs, while the American “Inflation Reduction Act” plan to promote green industries threatens to cause collateral damage to a major ally.
This American plan will be on the list of the French Minister of Economy, Bruno Le Maire, and the German Robert Habeck, to Washington, the day after tomorrow, Tuesday, before the European Union prepares its response to this plan, on the occasion of a summit of the heads of state and government of the bloc on February 9 and 10.
The “Inflation Reduction Act”, for which $430 billion was allocated, provides for subsidies for green industries such as manufacturers of electric car batteries and solar panels, similar to the Chinese model of subsidies on its soil, provided that the companies manufacture these products in the United States.
Tobias Gerke, a researcher at the European Council on International Relations, commented, “One of the main goals of the US law to reduce inflation is to exclude Chinese suppliers from clean energy production chains,” considering that the United States thought “first and foremost” in its own interest in terms of creating employment and manufacturing opportunities, as well as reduce dependence on China.
China is a major player in the electric vehicle sector, with control of 78 percent of global production of battery cells and three-quarters of the largest lithium-ion battery factories, according to a study by the Brookings Institution in Washington.
With regard to the United States, the issue of Europe was not raised in this file until at a later stage, according to what Gerke added, as happened with regard to South Korea or Japan, two countries that are traditional allies of Washington, but they were excluded from subsidies, unlike Mexico and Canada.
For her part, the former European Commissioner for Trade, Cecilia Malmström, who is now a member of the Peterson Institute for Research in Washington, told Agence France-Presse: “Europe has become a kind of victim” in this effort to reduce dependence on China, adding: “I don’t think it was. intended to target the Europeans.”
The fierce confrontation began on the economic and technological levels since the arrival of former President Donald Trump to the White House.
This first took the form of punitive tariffs early in 2018, which remained in effect after the election of Joe Biden, who also adopted a tough tone towards Beijing.
In addition, in October, Washington imposed restrictions on the export of some electronic components to China in the name of the national interest by adopting the “Chips Act and Science Act” that provides about $ 53 billion to support the production of semiconductors in the United States, up to the “Act to reduce Inflation.
John Bateman of the Carnegie Endowment Center for International Peace wrote in Foreign Policy that the Americans would seek to “slow China’s technological boom at any cost.”
race to subsidies
Europe’s concerns deepened following the economic and supply crisis caused by the Covid pandemic and the war in Ukraine, which called into question the rules of globalization.
This global priority raises fears of a race for aid in the United States and China, as well as in Europe, where the commission wants to facilitate the distribution of state aid in response to the policies of its competitors.
Former director-general of the World Trade Organization, Pascal Lamy, said Europe should “put pressure” on Washington because the plan is “more anti-European than anti-Chinese”.
This stalemate between the two historical allies also raises the issue of European strategy towards China, according to Tobias Gerke, while Chinese components have become at the heart of the electric car manufacturing process on the continent.
“As is happening in the United States, clean energy supply chains in Europe depend dangerously on China,” Gerke said, noting that “focusing on this dependence is in the economic interest of the European Union and may convince Washington that Europe is a necessary ally in the face of China.”
• China is a major player in the electric vehicle sector with control of 78% of the global production of battery cells, and three-quarters of the largest factories for the manufacture of lithium-ion batteries.
• Europe’s concerns deepened following the economic and supply crisis caused by the Covid pandemic, and the war in Ukraine that called into question the rules of globalization.