(Finance) – The contents and effects of the highly contested issue Joe Biden’s Inflation Reduction Act I’m in the middle of the last one Ecopill by Andrea Ferrettieconomist and university professor, who explains the scope of the protectionist law passed by the USA and the European response, which has yet to find a compromise point.
1- The IRA
This is a Biden administration program that allocates a good 370 billion of dollars of public subsidies to favor the environmental transition in the United States. By way of example, at the company level, these subsidies support the production and use of the most advanced green technologies, while at the private level they support, for example, the purchase of electric vehicles and the energy efficiency of homes.
2- Protectionism
The delicate point is that the program has a decidedly protectionist DNAall aimed at enhance the made in USAnot in the context of healthy competition, but thanks to monstrous subsidies capable of affect free competition between countries. The IRA benefits, for example, are triggered only on purchases of goods manufactured and/or assembled in the United States or on products that contain Made in the USA components. Just to clarify, the Texan consumer will receive these subsidies for the purchase of one Teslabut not for buying one BMW greens built in Germany. Consequently, on the one hand the export of green technology to the United States is limited and on the other the aid magnet attractsnot only the production sites of European companiesbut also investments and European know-how linked to the most advanced green technologies, opening up dangerous gaps in European supply chains.
3- The European response to Biden’s IRA
On February 1, Mrs von der Leyen presented a address document, aimed at promoting the ecological transition in Europe and at countering the IRA. The focal point of the document, then taken up again in the conclusions of the recent European Council, envisages the extension of the possibility, for various European countries, of grant public subsidies to companies operating in the green transition sectors and also provides for the speeding up of the authorization process.
4 – Two considerations
There first consideration is that countering Biden’s IRA, dramatically loosening the shirts of state aid, risks creating a further gap between countries with large spending capacity such as Germany and countries with severe budgetary constraints such as Italy. To this
In this regard, the president of Confindustria Bonomi reminds us that, in 2022, out of 540 billion in approved state aid, 50% was in favor of Germany, 30% was in favor of France, only 5% in favor of Italy. In this regard, the position of our government in favor of a policy of targeted, temporary and proportionate aid was rightly incorporated in the conclusions of the recent European summit.
There second consideration is that, then, an effective response to US protectionist policy passes through a mix composed of: the continuation of a negotiated with the US to reduce the protectionist impact of the IRA; a greater flexibility in the use of Community funds by different countries; the creation of a sovereign wealth fund which, by issuing common European debt, protects the competitiveness of our industrial fabric. The match has just begun and the next round is set in Brussels on 23 and 24 March.
(Photo: Chones)