American protectionism is pushing Europe to seek how to better support its industry

Written 4 Dec. 2022 at 16:53Updated 4 Dec. 2022 at 5:30 p.m

Europeans are outraged by the Inflation Reduction Act (IRA), the protectionist law passed in August, equipped with $369 billion in subsidies for “clean” technologies in the United States. But Americans don’t care. Their imperative is to develop the industries of the future without being dependent on China. This attitude sends Europe back to its own weaknesses and the need to better support its industry.

The president of the European Commission, Ursula von der Leyen, is well aware of this. She said this ahead of the meeting of the US/EU Trade and Technology Ministerial Council (TTC), which will be held this Monday in the US, where potential “exemptions” for the IRA will be discussed. . In a speech at the College of Bruges on Sunday, she announced that the Union “will respond in an appropriate and well-calibrated way to the IRA”, without engaging in a trade war.

A three-point strategy. First, “adjust the rules” to facilitate public investment. Europe is already approving state aid – €5.4 billion has been allocated to the hydrogen industry in particular this summer. However, these aids focus on the initial industrialization phase, on leaving the laboratory. Ursula von der Leyen wants to “support the entire value chain up to mass production of the most strategic green technologies and clean finished products”. This is what the IRA does with its support for production and consumption.

State aid and sovereign wealth funds

Second, allow national support, provided it is coordinated. Between the lines, the German 200 billion euro plan is a good thing, but it should have been coordinated so as not to create distortions in the single market. In the short term, Ursula von der Leyen wants to boost the RePowerEU energy independence plan launched after the invasion of Ukraine.

In the medium term, and this is the third strategic axis, more funds must be made available for the transition to clean industries. Hence the need to create this Sovereignty Fund, which the President had already called for in his State of the Union address. With “new and additional funding at European level” and “a higher level of policy coordination, such as hydrogen, semiconductors, quantum computing, artificial intelligence and biotechnologies”.

The TTC is certainly not the right forum to build this strategy, assures a source in the European Commission, who also explains why Thierry Breton is not making the trip. But, she says, “it’s not a question of pushing a ‘Buy European Act’ like Paris would like”: that would be a “red flag” for many member states who fear offending their trading partners. And that would be to put yourself at the wheel of France, which is campaigning for this project.

Speed ​​up and simplify procedures

On Saturday, returning from his state visit to America, Emmanuel Macron in an interview with “Parisien” defended the idea of ​​”subsidization made in Europe”: “The Americans have a Buy American Act, the Chinese have more than a “buy Chinese law,” he recalled.At the end of November, Prime Minister Elisabeth Borne also went to plead for a “Buy European Act” in Berlin.

Beyond the denominations, Paris reckons that the IRA’s shock forces a change of method. “Europe does not need to be ashamed of the amounts that have been put on the table. The real European difficulty is the complexity, the slowness of the procedures”, the entourage of the head of state points out. “A tax deduction as provided by the IRA in the United States is immediate; IPCEI Hydrogen [les aides d’Etat européennes pour les industries naissantes, NDLR], there are two years from the time the company submits its case and receives the support. Europe has to shake its fleas”.

When Europe promotes state support for fledgling industries

“Europe has changed”, we already remembered on the sidelines of the state visit to Washington on Thursday, in the company of Emmanuel Macron: “the idea that we cannot provide state aid to an infant industry was a reality five or six years ago. We has shaken Europe to move it in the direction of industrial sovereignty”.

In Brussels, Thierry Breton launched the Clean Tech Europe initiative on Wednesday to accelerate the development of the five technologies of the future, solar, wind, heat pumps, electrolysers and electrical networks. Germany and France are among them. According to an internal document consulted by “Euractiv”, support for producers’ operating expenses and local production criteria – such as IRA – could be considered. However, this is a simple schedule with no budget at this time.

The Covid pandemic, which created a shortage of Chinese products in Europe, prompted Brussels to put 43 billion euros into a “Chips Act” to support its semiconductor industry, including 30 billion in state aid. Industrialists invest locally. A battery sector has also been created.

“We could extend the Chips Act to other industries. But to get the consent of the 27, we will have to calibrate the measures with regard to the WTO compatibility rules. You cannot copy and paste the IRA,” says a source in the EU Commission, however .

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