Tai and Dombrovskis discuss US Inflation Reduction Act

TL/DR –

US Trade Representative Katherine Tai met with the European Union’s Executive Vice President Valdis Dombrovskis to discuss the U.S. Inflation Reduction Act, which the EU fears could disadvantage European companies due to its $369 billion in subsidies for clean technologies. The subsidies, which favor North American manufacturers and exclude electric vehicles assembled outside of North America from US tax credits, may lure companies away from Europe. The EU seeks equal treatment as US trade partners Canada and Mexico, but revisions to the act are unlikely.

U.S. Trade Representative Discusses Inflation Reduction Act with EU

U.S. Trade Representative Katherine Tai and EU Executive Vice President Valdis Dombrovskis met to discuss the U.S. Inflation Reduction Act. The Act includes $369 billion in subsidies for clean technologies, sparking fears among EU countries of potential disadvantages for Europe-based companies.

The subsidies largely favor North American manufacturers, with local content requirements that could potentially lure businesses away from Europe. The Act excludes tax credits for electric vehicles assembled outside North America, drawing criticism from EU leaders.

According to a statement from Tai’s office, she expressed optimism about the continued cooperation between the U.S. and the European Union to strengthen the global clean energy sector. The discussion took place on the sidelines of the Munich Security Conference.

The EU has requested equal treatment as U.S. trade partners Canada and Mexico, which are largely included in the subsidy schemes. However, any revision of the Act by the U.S. Congress seems unlikely. The European Commission and the White House have established a high-level task force to address this issue.

Concerns around the Inflation Reduction Act aren’t limited to European nations – South Korea has also sought discussions with the U.S. regarding the legislation. The ongoing negotiations for a global agreement on sustainable steel and aluminum were also part of the talks with Dombrovskis, with both parties agreeing to maintain close contact throughout the negotiation process in 2023.

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