Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Electric cars rekindle transatlantic trade war

Electric cars rekindle transatlantic trade war

Europe is incensed over a generous subsidy encouraging US consumers to ‘Buy American’ when it comes to greener cars.

If you thought transatlantic trade wars were a forgotten relic of Donald Trump's presidency, think again.

The EU is threatening to pull out the big guns if Washington doesn’t change its new tax credits for electric vehicles, which will incentivize U.S. consumers to "Buy American" when it comes to getting a greener car.

Since the Europeans are pinning their industrial ambitions on the transition to electric vehicle technology, the dispute will be the elephant in the room when EU trade chief Valdis Dombrovskis meets his U.S. counterpart Katherine Tai (virtually) on Thursday.

“This has the potential of becoming a new Airbus-Boeing,” said one EU trade diplomat, referring to the 17-year-long transatlantic trade war over subsidies for the plane makers Airbus and Boeing.

The European Commission slammed the U.S. measure as a “new and significant transatlantic trade barrier by the U.S." A European Commission spokesperson said the EU will consider all options, including bringing a case against the U.S. to the World Trade Organization.

After years of successfully trying to resolve transatlantic trade conflicts, the new subsidies are throwing a spanner in the works, just as the West seeks to forge a united economic front against Russia and on tackling climate change.

“We could do without an additional trade irritant between partners in such a very difficult global context,” said Bernd Lange, the European Parliament’s trade committee chair.


Protectionism in disguise?


The new tax credits for electric vehicles are part of a huge U.S. tax, climate and health care package, known as the Inflation Reduction Act, which passed the U.S. Congress in August.

The big idea is that a U.S. consumer can claim back $7,500 of the value of an electric car from their tax bill. But to qualify for that credit, the car needs to be assembled in North America and contain a battery with a certain percentage of the metals mined or recycled in the U.S., Canada or Mexico. Those rules become more strict over time, giving American producers time to prepare.

The bill aims to reduce U.S. dependence on countries such as China for the critical materials in the electric car industry. It wants to help the transition to electric vehicles and at the same time create jobs in the U.S., a key policy goal for President Joe Biden.

Indeed, the U.S. has used the need for a shared approach to China in its argument hitting back against EU criticism.

“This bill provides strong incentives to reduce our dependence on China for the critical materials that will power this key industry, and we look forward to working with allies and partners to advance our climate goals, strengthen and diversify our supply chains, and address our shared concerns with China’s non-market policies and practices,” said Adam Hodge, a spokesperson for the office of Trade Representative Tai.

David Kleimann, a trade expert at the Bruegel think tank, was unimpressed with the U.S. position, which he argued marked a setback for the European Commission's efforts to clear up economic relations with the U.S.

This aerial photo shows the Tesla factory under construction in 2019 in Shanghai, China


"After inventing the concept of 'friend-shoring' last year, the [U.S. Trade Representative], the Treasury, and affiliates seem to slowly but surely run out of semantic innovations to disguise blatantly protectionist policies — 'near-shoring' being the most recent somewhat cringeworthy word creation," Kleimann said.

The EU car lobby ACEA said the measures undermined WTO rules and would also slow down the shift toward electric vehicles, as the local content requirements for batteries didn't reflect “reasonable expectations” for building a local battery supply chain.

The EU warned such tax credits shouldn’t distinguish between foreign and domestic car manufacturers. The European Commission called the bill “discriminatory,” in violation of WTO rules and said they risked undermining shared EU-U.S. climate ambitions. Brussels is now looking into whether to follow South Korea's lead and start a case at the World Trade Organization, although EU trade diplomats still have to discuss how to handle the new trade irritant.

Lange, the Parliament’s point person on transatlantic trade relations, said the EU should consider starting a WTO case if the U.S. fails to address EU concerns “within a reasonable timeframe.”


Tit for tat


If Brussels does eventually end up at the WTO, the road toward a solution is set to be long.

The WTO’s Appellate Body, the world's highest dispute-resolution body for trade, is still in limbo due to an American blockade against appointing new judges over complaints about how it functions. But the U.S. also has not signed up for the interim court that was created in its absence, which would make it difficult for Brussels to enforce any victories over Washington.

Precisely to address these kinds of situations, the EU last year introduced new enforcement rules, which allow retaliation when a trade dispute is blocked at the WTO.

Kleimann said the Commission is likely to proceed with caution to try to find a diplomatic solution such as scrapping the measure or concessions in other areas. But he acknowledged the odds of such a resolution were low and cautioned that this dispute may well "eventually result in the first unilateral EU retaliatory measure under the reformed enforcement regulation."

This risks triggering a politicized downward spiral of retaliatory tariff measures, which brings back dark memories of the transatlantic trade wars under Trump, who had argued that "trade wars are good, and easy to win."

Since Dombrovskis took over the EU's trade portfolio two years ago, he has cast himself as a transatlantic peacemaker. Washington and Brussels in recent years called a truce in their festering feud over subsidies paid to airplane makers and on steel tariffs launched against one another.

Brussels and Washington also set up a new body that aims to put the antagonism of the Trump era behind them to cooperate in areas such as robotics, microchips and artificial intelligence. Brussels is frustrated the tax credit was not brought up in technical meetings in the context of that Trade and Technology Council, two EU diplomats said.

But it's not just the lack of communication that led to bad blood — it's also the policy itself. When the EU and the U.S. were seeking a compromise on steel tariffs, there was a broad understanding in EU capitals about the limited room for maneuver that Biden had, especially as steel producers, unions and a section of his party were ramping up pressure ahead of the U.S. midterm elections.

This time around, EU officials are not cutting Biden so much slack.

Newsletter

Related Articles

0:00
0:00
Close
Unelected PM of the UK holds an emergency meeting because a candidate got voted in… which he says is a threat to democracy…
Farmers break through police barriers in Brussels.
Ukraine Arrests Father-Son Duo In Lockbit Cybercrime Bust
US Offers $15 Million For Info On Leaders Of Cybercrime Group Lockbit
Apple warns against drying iPhones with rice
Alexei Navalny: UK sanctions Russian prison chiefs after activist's death
German economy is in 'troubled waters' - ministry
In a recent High Court hearing, the U.S. argued that Julian Assange endangered lives by releasing classified information.
Tucker Carlson says Boris Johnson wants "a million dollars, in Bitcoin or cash, from Tucker Carlson to talk about Ukraine.
Russia is rebuilding capacity to destabilize European countries, new UK report warns
EU Commission wants anti-drone defenses at Brussels HQ
Von der Leyen’s 2nd-term pitch: More military might, less climate talk
EU Investigates TikTok for Child Safety Concerns
EU Launches Probe Into TikTok Over Child Protection Under Digital Content Law
EU and UK Announce Joint Effort on Migration
Ministers Confirm Proposal to Prohibit Mobile Phone Usage in English Schools
Avdiivka - Symbol Of Ukrainian Resistance Now In Control Of Russian Troops
"Historic Step": Zelensky Signs Security Pact With Germany
"Historic Step": Zelensky Signs Security Pact With Germany
Russian opposition leader Alexey Navalny has died at the Arctic prison colony
Tucker Carlson grocery shopping in Russia. This is so interesting.
France and Germany Struggle to Align on European Defense Strategy
‘A lot higher than we expected’: Russian arms production worries Europe’s war planners
Greece Legalizes Same-Sex Marriage and Adoption Rights
Russia "Very Close" To Creating Cancer Vaccines, Says Vladimir Putin
Hungarian Foreign Minister: Europeans will lose Europe, the Union's policy must change drastically
Microsoft says it caught hackers from China, Russia and Iran using its AI tools
US Rejects Putin's Ceasefire Offer in Ukraine
The Dangers of Wildfire Smoke and Self-Protection Strategies
A Londoner has been arrested for expressing his Christian beliefs.
Chinese Women Favor AI Boyfriends Over Humans
Greece must address role in migrant vessel disaster that killed 600: Amnesty
Google pledges 25 million euros to boost AI skills in Europe
Hungarian President Katalin Novák Steps Down Amid Pardon Controversy
Activist crashes Hillary Clinton's speech, calls her a 'war criminal.'
In El Salvador, the 'Trump of Latin America' stuns the world with a speech slamming woke policing after winning a landslide election
Trudeau reacts to Putin's mention of Canadian Parliament applauding a former Ukrainian Nazi in his interview with Tucker Carlson.
The Spanish police blocked the farmers protest. So the farmers went out and moved the police car out of the way.
Volodymyr Zelenskiy fires top Ukraine army commander
Tucker Carlson's interview with Vladimir Putin raises EU concerns
Finnish Airline, Finnair, is voluntarily weighing passengers to better estimate flight cargo weight
Russia's Economy Expands by 3.6% Due to Increased Military Spending
Ukraine MPs Vote To Permit Use Of Dead Soldiers' Sperm
German Princess Becomes First Aristocrat To Pose Naked On Playboy Cover
UK’s King Charles III diagnosed with cancer
EU's Ursula von der Leyen Confronts Farmer Protests Amid Land Policy Debates
Distinguishing Between Harmful AI Media and Positive AI-Generated Content: A Crucial Challenge for the EU
Tucker Carlson explains why he interviewed Putin
Dutch farmers are still protesting in the Netherlands against the government, following the World Economic Forum's call for 'owning nothing.'
Hungarian Prime Minister Viktor Orbán stands up for European farmers and says, 'Brussels is suffocating European farmers.
×