The United States administration will seek a new approach to trade to create so-called inclusive prosperity, according to a visiting official, at a time the European Commission is set to respond to the US Inflation Reduction Act (IRA).
Visiting Brussels on Tuesday (17 January), US trade representative Katherine Tai met with stakeholders to discuss EU-US trade relations currently overshadowed by the IRA, which offers large-scale subsidies for green technologies.
“President Biden has instructed me to bring a new approach to trade that advances the needs of our workers, protects the environment, and creates an inclusive prosperity,” said Tai during a press conference with the European Commission’s Executive Vice President Valdis Dombrovskis.
Meanwhile, Dombrovskis announced a Commission proposal for an EU response to the IRA on the first of February.
EU member states have repeatedly criticised the IRA for its discriminatory approach since a part of the subsidies are not available to EU producers, causing fears that investments into new technologies might be diverted from the EU to the US.
Despite the meeting, no particular breakthrough seems to have been achieved and while both Tai and Dombrovskis reiterated their willingness to strengthen the transatlantic relationship, the disagreement between the EU and the US on trade matters was apparent.
Dombrovskis discussed the need to uphold the multilateral order, while Tai talked about a “new approach” and a “vision for building an economically prosperous global order.”
While Dombrovskis warned of the risks of “going down the route of discriminatory subsidies or tax credits,” Tai seemed to have another direction in mind, saying that she wanted to “build a trading regime that creates [a] race to the top.”
EU trade unions find IRA “inspiring”
During her stay in Brussels, Tai also met with European trade union representatives who said that the EU should take inspiration from the IRA, especially by making state aid dependent on social conditions.
Luc Triangle, general secretary of IndustriAll Europe, praised the IRA approach of “investing in clean energy products and supply chains, and closely link this investment to a worker-centred decent jobs agenda.”
“In this sense, the IRA is inspiring,” he said in a statement.
The General Secretary of the European Trade Union Confederation (ETUC), Esther Lynch, said that the “US government’s commitment to tackling climate change while creating more well-paid, union jobs is admirable but cannot come at the detriment of workers in Europe.”
According to her, an EU response to the IRA would have to match the US level of subsidies to green industries and its commitment to social rights.
This response is currently being fleshed out in the EU Commission in collaboration with the member states.
On Friday, 13 January, competition Commissioner Margrethe Vestager announced some details about a further relaxation of state aid rules to boost national subsidies in a letter to EU finance ministers, seen by EURACTIV.
Meanwhile, Commission President Ursula von der Leyen announced a “Green Deal Industrial Plan” and a “Net-Zero Industry Act” when talking to the world’s economic elite at the World Economic Forum in Davos on Tuesday.
During the joint press conference with Tai, Dombrovskis announced that the EU Commission would present its proposal for a European response on 1 February.
The Commissions European response to the IRA will be announced on 1 February, one week ahead of an EU summit in Brussels, where member state heads are expected to discuss the matter in detail.
