Does Emmanuel Macron have the future of Europe in his hands? The French president, who will be on a state visit to Washington from this Tuesday evening, intends to obtain from his American counterpart Joe Biden exemptions for European industrialists penalized by American legislation. The apple of discord lies in three letters: the IRA law (“Inflation Reduction Act”), which came into force last August, aims to reduce costs for North Americans. This plan includes massive investments in the energy sector and in favor of the climate, but above all generous subsidies for electric vehicles, batteries and renewable energy projects. A law deemed “protectionist” according to some European officials.
Indeed, this shower of subsidies will only be paid for products made in the United States, which will favor, for example, American Teslas compared to German electric BMWs and American steel for wind farm projects. Among the points that make Europeans frown: a tax credit, up to 7,500 dollars, reserved for the acquisition of a electric vehicle coming from a North American factory with a locally manufactured battery, therefore excluding automobiles produced in the EU. In addition to German manufacturers, their Japanese or Korean counterparts are likely to suffer from this aid. But it is above all the 370 billion dollars injected to decarbonate the American economy which is a blow to European industries. Not to mention attractive energy prices in the United States – thanks to shale gas – twice cheaper than elsewhere.
If the impact on the climate was welcomed by the President of the Commission, the German Ursula von der Leyen, the Europeans quickly sounded the alarm. On November 8, Emmanuel Macron thus denounced a text which is “not in accordance with the rules of the World Trade Organization.” The vast American plan which aims to limit the inflationary shock is seen as an attack on Brussels. An initiative akin to “a declaration of war”, worried in L’Express Hubert Mongon, the general delegate of the Union of industries and trades of metallurgy. For European manufacturers, this is a very strong risk of distortion of competition, while the economic context was already gloomy: war in Ukraine, energy crisis, inflation.
Macron looking for exemptions for Europe
A context for the moment favorable to our American allies since the industry of Uncle Sam chains contracts and liquefied natural gas “made in US” is bought at a high price by Europe, deprived of Russian gas. With its exorbitant energy prices and its vast plan to support the American economy, Washington is weakening the European Union, assures the German newspaper “Frankfurter Allgemeine Zeitung“. Mid-September, You’re here informed Germany that it wanted to refocus its activities in the United States, and froze the project for a major battery factory, according to The Wall Street Journal, taken back byInternational mail. “The relocation of European industry is, seen from Washington, only collateral damage in the new cold war that the United States is launching against China”, analysis in L’Express, Cécile Maisonneuve, founder of DECYSIVE and adviser with the energy and climate center of Ifri.
While Europeans are up in arms against this law, could Emmanuel Macron’s visit have a favorable impact for Brussels? It is inconceivable that “the Congress, moreover with a House of Representatives with a Republican majority, can fundamentally revise the IRA”, admitted to AFP an adviser to Emmanuel Macron. But, “we can imagine that the American administration grants exemptions for a certain number of European industries, perhaps on the model of what it already grants for Mexico or for Canada”, he said. told reporters. Beyond exemptions, Europeans must move forward in unison to remain in global competition by adopting their own IRA, the “Buy European Act”, argued the adviser, adding that this is the message Americans.
“It is in the common interest” of European countries, adds the Elysée. “We cannot risk a greater deindustrialisation of Europe at a time when our objective is to reindustrialise”. The French presidency admits that Europe will find it difficult to compete with the United States in terms of resources, citing the 350 to 400 billion dollars included in the recent IRA legislation. “It is not necessarily obvious on a European scale, however, it will be necessary, in Europe, to find the means to support this competition,” opined the adviser to the Elysée. Either way, Europeans agree that now is not the time to quarrel with their allies across the Atlantic with a war on its borders.
“Quarrels are exactly what Putin would want, European and American diplomats agreed,” David Kleimann of the Bruegel think tank points out in Politico. For his part, Emmanuel Macron is the first French president to have the “honor” of being offered two state visits. The first was made in April 2018 at the invitation of Republican President Donald Trump, who had started a trade war against China which, a few months later, also affected European countries. “It is a visit that is exceptional in its character because it is the first state visit organized by the Biden administration. It is therefore quite significant of the friendship between France and the United States”, we estimate at the Elysée. Only the proofs of love remain.