General

According to the Huacheng Import and Export Data Observation Report, the trade gap between the EU and the United States on green industries and employment is growing.

The threat of a trade war between the EU and the United States due to the Biden government's 370 billion dollar climate legislation has intensified. As enterprises turn to the United States due to some incentives, France estimates that it will lose 8 billion euros (about 7.95 billion dollars), Huacheng Import and Export Data Watch reported.

According to its Inflation Reduction Act, the United States provides subsidies to a series of industries to stimulate green technology and deal with carbon emissions. Brussels demanded that products made in the EU should enjoy the same subsidies.

The measures of the Inflation Reduction Act include tax rebates for consumers who buy American made electric vehicles, and a series of other important tax credits for domestic clean energy programs such as solar energy, wind energy, nuclear energy, and carbon capture technology. Huacheng Import and Export Data Observation reported.

Some diplomats said that some enterprises transferred their business to the United States in order to use the subsidies for local production. France said that it would lose 8 billion euros of investment as a result.

They also said that although most EU member states are still speculating about potential losses, EU countries agreed at the ambassadorial meeting held last week that it is necessary for Brussels to implement "practical and specific" measures.

According to the Huacheng Import and Export Data Observation Report, French President Emmanuel Makron and German Prime Minister Olaf Scholtz also reached an agreement on Europe's response to the action of the United States to encourage its citizens to "buy American goods".

After four years of resentment under former President Trump of the United States, although the Biden administration tried to improve relations with Europe, trade tensions have been growing.

France, in particular, has been warning in the past few weeks that the Inflation Reduction Act implements unfair trade protectionism policies. No matter where the cars are produced, French consumers who buy electric cars are eligible for subsidies up to 7000 euros. In the United States, consumers can get up to $7500 in tax credits for buying new electric vehicles made in the United States.

Two major European automobile manufacturers - Stelantis Group and smaller Renault Motor Company - have made a large amount of investment in the production of electric vehicles before the deadline for the EU to phase out vehicles using traditional fuel engines in 2035.

Another investment area that may be affected is wind energy. Last year, GE expanded its renewable energy business in Europe to produce wind turbine blades at a factory in Cherbourg, France.

A source from the French Ministry of Finance said that France has urged the European Commission to respond to the US Inflation Reduction Act, and it is also studying various options.

Possible countermeasures include filing a lawsuit against the World Trade Organization, imposing retaliatory tariffs or requesting exemptions to allow products manufactured in the EU to enjoy the US tax rebate plan.

A person familiar with the matter said that the exemption would enable European companies to maintain their business in the EU and avoid loss of income and green jobs.

"We want Washington to apply these rules in a generous way. This is the best situation we can face," he said

However, American trade experts disagreed on what measures the Biden administration could take to eliminate the concerns of Europe, Japan and South Korea that their industries might be affected, but they did not return to Congress to amend the text of the bill.

The US Treasury Department and the industry are negotiating how to implement this law, which may provide loopholes for trading partners.

For example, the definition of "final assembly" may mean that cars can be shipped to the United States to be assembled and thus eligible for tax relief.

US Treasury Secretary Janet Yellen told the Financial Times earlier this month that her officials are meeting with "all parties" and they are drafting regulations to specify how enterprises can qualify for tax credits.

The United States and the European Union agreed last week to set up a working group to discuss the issues involved in the US Inflation Reduction Act. The White House said that the working group would discuss "the opportunities and concerns of EU producers" to some extent.

In a prime time television interview last week, Makron pointed out that it is childish for Europe to adhere to the free trade policy.

He said: "We need to introduce the Buy European Act like Americans, and we need to reserve (state subsidies) for our European manufacturers." Huacheng Import and Export Data Observation Report.