Joseph Biden’s flagship plan threatens to become a new trade war between the US and Europe. The stimulus bill being pushed by the US President has already been approved by the Senate but still lacks House approval, and Brussels is warning that as it stands it is “clearly discriminatory” against electric vehicles being manufactured in the EU, according to a spokesman for the European Commission declared to EL PAÍS. This has prompted the executive branch, chaired by Ursula von der Leyen, to write and verbally request before the State Department that these “discriminatory elements” be removed from the text “to ensure that it conforms to World Trade Organization (WTO) rules ) “.
No one expected that the mere arrival of Biden in the White House would solve all trade disputes between Brussels and Washington in one fell swoop, both those opened by Donald Trump and those that arose before. Indeed, in American political history, it is easier to find Democrats on the protectionist side than Republicans, at least until the New York tycoon entered the White House and without forgetting the resounding reservations of some of George Bush Jr.’s decisions. However, with this administration in Washington, relations on both sides of the Atlantic have greatly improved and several conflicts have begun to be resolved: for example, in June 2021, the Airbus-Boeing conflict that opened in 2004 was suspended for five years ., and the tariffs, requested by both parties for this fight, which amounted to approximately 10,300 million euros; In addition, talks to resolve aluminum and steel disputes began four months later. Now, however, that obstacle arises as the two partners become much more vigilant about China and see the demands they place on the Asian giant to compete on an equal footing increase.
The problem, which the European Commission claims to have discovered, was already visible in previous versions of the text. That would have prompted Community Executive Vice President Valdis Dombrovskis to take his grievances to US Ambassador to the EU Katherine Thai in September and October last year and to send letters to Democratic and Republican leaders in Congress. One of those letters, sent on Oct. 29, 2021, was co-signed with authorities from Canada, Mexico and South Korea, community sources said. “Actions like these are at odds with recent efforts to rebuild our relationship to resolve past issues and avoid new points of tension,” they add. The movements have apparently continued in recent weeks.
Taking advantage of the Inflation Reduction Act, the Biden administration has enacted measures to stimulate electric car manufacturing in the United States. Europe likes it. “The EU agrees that tax credits can be an important incentive to boost demand for electric vehicles. This is crucial to promote the transition to a sustainable mobility sector and reduce greenhouse gas emissions,” the community spokespersons add. Finally, the Von de Leyen Commission has made tackling climate change its top priority. But this is where the discrepancies begin.
An employee was working on an electric model from the Volkswagen ID series at the Hanover plant on June 16. picture alliance (via Getty Images)
Violation of WTO rules
What is worrying in Brussels is that access to tax aid is subject to conditions that penalize electric vehicles and components manufactured in the European Union. One of Washington’s requirements is that the minerals used to build the car and its parts were mined in the US, recycled there or come from countries with which it has free trade agreements. The other condition, which Brussels also sees as “discriminatory”, stipulates that the tax break, which would reach 100% in 2028, will be applied to batteries and vehicles assembled in the country.
“It favors certain countries rich in natural resources, battery production and car assembly in North America, to the detriment of EU products exported to the United States,” they conclude in the European capital, to the point in which they believe that it goes beyond the rules of the WTO.
The automotive industry is in a difficult situation worldwide. The pandemic led to the collapse of supply chains and shortages of components, particularly semiconductors. At the end of the crisis caused by the coronavirus, the situation was exacerbated by the rapid increase in demand, which put more pressure on these chains, to which the war in Ukraine and growing tensions between China and Taiwan have now been added. one of the areas with the highest ship traffic in the world. And underneath that is the structural shift that manufacturers need to make, from vehicles that run solely on fossil fuels to hybrids or those that only use electricity.
It is precisely the latter that underlies this potential trade conflict: the future of the sector lies in this type of vehicle; Biden’s plan aims to boost sales of cars and components made there; The United States became the main destination for European vehicle exports in 2021 (almost 26,000 million of the 140,000 million euros sold outside the EU) in 2021; and finally, the trade balance of the 27 in this sector, both with the United States and with the whole world, is frankly favorable for Europe, at 18 billion and 73 500 million respectively. Those four brushstrokes and the data that goes with them go a long way to explaining the interests the two retail giants have here in an industry that creates stable, well-paying jobs.
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