Facts: EU and IRA
The US’s major reform package to bring down inflation (Inflation reduction act) was approved by President Joe Biden in August 2022.
Encompassing more than $370 billion, the environmental investments are the big part of the package, which will help drive emissions reductions in the electricity and transportation sectors in particular through tax breaks for wind turbines, solar panels, batteries and electric vehicles.
The EU has praised the environmental investments, but is concerned that the package will distort competition to the detriment of European companies – which, in addition, many states in the US are now trying to lure across the Atlantic instead of gaining access to the American support.
The European Commission will present action proposals on February 1 before an EU summit on February 9-10 and has previously promised proposals for a “sovereignty fund” for this summer to free up money for investments. Before that, they also promise some kind of “bridge solution” so as not to disadvantage countries and companies with poorer financial resources than others within the EU.
On Wednesday, the eyes of the world economy will be directed towards Brussels when the European Commission will present its upcoming competition plans.
In what is formally called the commission’s “introduction” to the next EU summit, on February 9-10, the details are to be given on how to deal with the consequences of the giant IRA support package that US President Joe Biden got through last fall.
The IRA is an abbreviation for the English Inflation Reduction Act, but increasingly in English as well as in German and French it has begun to be pronounced as one word – Ira – so as not to be confused with the violent Irish nationalists of the old IRA.
Heavy Swedish role
The package has been praised for its way of supporting the green transition, but has also raised concerns within the EU that US subsidies will distort competition and attract European companies to emigrate across the Atlantic instead.
— All member states agree on two things: it is good that the United States tackles the climate challenge in a different way than before. The second is that there are some protectionist elements in this that are not good, quite simply, says Minister for Aid and Foreign Trade Johan Forssell (M) in a TT interview inside Sweden’s EU representation in Brussels.
As the country chairing the EU’s Council of Ministers in the spring, Sweden plays a heavy role in getting the EU countries to pull in the same direction when it comes to the EU’s counter-pull.
Aid and Foreign Trade Minister Johan Forssell (M) inside Sweden’s EU representation in Brussels. Rules and support
Commission President Ursula von der Leyen has already gossiped a bit about what’s going on. In a speech in Davos on January 17, she promised a zero-emissions industry plan to “make Europe the home of green technology and industrial innovation”.
The plan stands on four legs: simpler permit rules for green technology, training to get competent personnel, more international trade as well as subsidies and loosened state aid rules.
The latter is the major point of contention. Simpler state aid can distort competition within the EU as large rich countries can give more support to their companies. One solution could be more money centrally from the EU – which far from everyone is happy about.
— Karl Marx on steroids, the Netherlands’ EU ambassador Robert de Groot is said to have said about the idea of joint EU loans to support industry, according to information given to the news site Politico Europe.
Neutral mediator?
Even before the Commission’s input, de Groot and his colleagues are discussing what the EU countries will say about the matter at the summit in February. Disagreement is still great.
Seven member states – including Finland and Denmark – warn of a “subsidy race” in a letter to the Commission.
As the chairing country, Sweden is outside, although the government diligently tries to emphasize that it is important to avoid both trade wars and a competition about who can subsidize the most.
— Then we understand and notice that there are other member states that are much more interested in changing state aid rules and using the EU’s own funds, and perhaps expanding them, and it is clear that here we need, if we do not get further (in the negotiations) with the US, make a decision and be a neutral mediator in this, says Johan Forssell.
To New Zealand
Had Sweden not been the chair country, it might have been possible to push harder for the Swedish line. Forssell still sees it as an advantage to currently be chairman.
— It gives us a little more opportunity to influence than otherwise. Then it is part of the chairman’s role that everything does not, for understandable reasons, always turn out exactly as you want, says the trade minister.
He himself hopes to contribute to better competitiveness for the EU by pushing to complete new trade agreements.
— On our agenda is signing with New Zealand. I’m off to New Zealand in just a few weeks. Australia is also well advanced, says Forssell.
Important meeting
It is likely that part of the fight over IRA – or IRA if you prefer – will also be fought in Sweden as the EU and US joint trade and technology council, TTC, will meet on Swedish soil in the spring with heavy-handed American ministers and the EU – commissioners on site.
Perhaps the government will then try to do as the European Commission did a few weeks ago and take the TTC delegations up to Kiruna and the ice hotel in Jukkasjärvi.
— Yes, we’ll see if we use it as a negotiating ploy: take them back into the ice rooms, says the trade minister in Brussels.
US Commerce Secretary Gina Raimondo and EU Commission Competition Commissioner Margrethe Vestager during the last TTC meeting in the US in December. The next meeting of the TTC will be held in Sweden in the spring. Archive image.