French and German ministers claim assurances from Washington over IRA subsidies

The economy ministers of France and Germany said the US had agreed to address European concerns over the Inflation Reduction Act, the $370bn support programme for US clean tech, but acknowledged that their talks with US officials had not yielded any concrete proposals.

Bruno Le Maire, France’s economy minister, said he and his German counterpart Robert Habeck had achieved “substantive progress” in their talks in Washington and won “assurances” that the US would seek to assuage European concerns.

But few specifics emerged from the meetings, apart from an agreement on full transparency over the level of subsidies on offer under the IRA so that Europe can match them if necessary.

Fears have been growing in the EU that the targeted support now on offer in the US would cause a stampede of business and investment away from the EU to America.

The unusual decision by Habeck and Le Maire to go together to Washington was meant to underline the full extent of European disquiet over the US support measures.

Habeck said that the meetings — with US trade representative Katherine Tai and Gina Raimondo, the commerce secretary, as well as Treasury secretary Janet Yellen — conveyed the “European view of a few problems” with the IRA, as well as the EU’s concern that the act could usher in a “bidding war on subsidies”.

Both he and Le Maire insisted that the message had got through. Le Maire said an agreement had been reached with US officials that the implementation of the IRA “should include as many EU components as possible, for example electric vehicles, electric batteries and critical minerals”.

The IRA offers companies billions of dollars in tax credits to boost investment in clean-energy technologies, with the aim of boosting the homegrown development of everything from hydrogen and electric-car batteries to solar panels and sustainable aviation fuel.

Companies will be rewarded for locating their supply chains either in the US or with allies and partners. European officials complain that the domestic content requirements run counter to World Trade Organization rules that are meant to bar discrimination against products based on their country of origin.

The act has triggered fears in the EU that companies will decamp from Europe to the US to take advantage of the subsidies. It has also raised concerns about the danger of a damaging subsidy race that will skew the competitive playing field in international trade.

“Building a strong industry in the US cannot be at the expense of EU countries,” Le Maire said before the meetings.

But the message from officials in Washington on the eve of the talks was defiant. Brian Deese, director of the National Economic Council at the White House, said the US allies had “nothing to fear . . . and quite a bit to gain” from the IRA.

“The United States is now leading, and other like-minded countries should both recognise that and also seek . . . opportunities to partner with us,” he added, saying the IRA would “accelerate the reduction in cost of deploying next-generation energy technologies that are critical for the world”. “We have nothing to apologise for, and, frankly, everything to be proud about,” he added.

Le Maire said French, German and US officials had agreed on the need for “full transparency about the level of subsidies and tax credits” awarded to private companies, as well as the need for “constant communication at the ministerial level” about strategic investments on both sides of the Atlantic.

Habeck said they had also discussed creating a “critical minerals club” designed to reduce the US and EU’s dependence on certain countries such as China for essential raw materials and diversify supply chains.

He also said that the Europeans and US agreed to let the US-EU Trade and Technology Council, which seeks to develop common tech standards, work towards creating a “common market in green industrial goods”.

The EU knows there is no chance of reopening the IRA. But it is hoping that it can influence the drafting of “guidelines” that determine how the act is implemented, in the hope that European companies might be cut into some of its benefits. The guidelines for critical minerals, for example, have not yet been drafted in detail.

However, talks held by a US-EU task force on the issue have yielded only partial progress. One concession recently trumpeted by EU officials would mean that electric vehicles built outside North America would qualify for tax credits if leased by consumers — a huge market in the US.

Additional reporting by James Politi