Dhe conflict between the United States and the EU over discriminatory subsidies for electric cars in the US $369 billion “Inflation Reduction” Act has been settled in principle. The EU Commission and the American government have agreed on a regulation that also gives European manufacturers free access to the subsidies. EU Commission President Ursula von der Leyen announced a corresponding agreement in principle on Friday afternoon after her meeting with American President Joe Biden in the White House. A joint statement released after the two met said they intended to immediately begin negotiations on a Critical Mineral Agreement. This is to be anchored later by the G-7 countries.
Von der Leyen said “that we will work on critical raw materials that have been sourced or processed in the European Union and give them access to the American market as if they had sprung from the American market”. Brussels and Washington are aiming for a bilateral trade agreement for critical raw materials. This allows the US government to classify the EU as a trading partner. The EU consistently points out that its own subsidy rules do not discriminate against foreign producers. At its core is a clause in the “Inflation Reduction Act” (IRA) that only grants buyers the full subsidies for electric cars if initially 40 percent (later 80 percent) of critical materials in the drive battery come from the United States – or one Country with which they have a trade agreement. That is Canada and Mexico, but not the EU. Before the interview in the Oval Office, Biden said they wanted to secure supply chains for America and Europe. The US Treasury Department pointed the way to a solution when it made it clear that the term free trade agreement is not defined in law.
Washington could fix such a raw materials agreement by government decree (executive order) of the President, the EU member states would have to ratify it. The procedure would have the advantage of leaving out Congress, where there are critical voices about “watering down” the IRA requirements. The negotiations between the Commission and the American government about the exception for the EU, which have been going on since last year, were therefore also carried out with the utmost discretion. Similar agreements are forthcoming with Japan and the UK.
At the end of last year, the EU and the USA had agreed on another exception to the IRA requirements for the auto industry. It stipulates that the rules on the proportion of local production for electric vehicles do not apply to leased vehicles. The German automobile manufacturers in particular will benefit from this. The share of leasing vehicles in the overall car market in the USA is traditionally just under a quarter. According to Commission estimates, however, it is between 50 and 60 percent for exports by German automobile manufacturers, and in individual cases even up to 80 percent.
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