Nov 22, 2022
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Darlings quarrel: EU and US on the verge of a trade war

Darlings quarrel: EU and US on the verge of a trade war


Six weeks before the entry into force of the American law to reduce inflation, Europe is concerned about the lack of a “peace agreement” from Washington and is preparing to respond. This is reported by Politico.

Europe’s fears stem from a $369 billion U.S. package of subsidies and tax breaks to support green businesses in the U.S., effective Jan. 1.

Back in August Joe Biden signed a law providing for tax cuts and benefits for companies using, in particular, “energy-saving technologies.” The problem is that “Washington’s scheme will encourage companies to move investments out of Europe and incentivize customers to ‘buy American’ when it comes to buying an electric car” and this “infuriates” major European automakers such as France and Germany.

As the newspaper writes, because of such protectionist measures, Germany is in a state of outright panic, as some of its leading companies in connection with a sharp increase in energy prices curtail domestic operations in order to invest in other countries. Berlin is not happy with more business encouragement to leave Europe, but a truce seems unlikely.

“If this quarrel now gets out of hand, it will lead to a trade war, which will terrify the beleaguered Europeans,” the article notes.

The EU sees a “largely token protest” at the WTO as a first step, but the clash could easily revert to the tit-for-tat tariff battles of the former US president’s era. Donald Trump.

Instead of an open tariff war with the United States, a radical plan is gaining momentum in Berlin to play its own game with Washington by funneling public funds into European industry to develop sectors such as solar panels and hydrogen technology, Politico writes. .

Berlin is increasingly inclined to follow the example of France, which is a supporter of the strengthening of European industry through public investment. This could happen if negotiations with the US “do not lead to a surprise last-minute decision.” Since Germany is the EU’s economic powerhouse, Berlin’s decision to use a government approach to subsidize its industry could be a deciding factor.

The publication notes that the time for decision-making is running out, however, recent attempts by the EU-US ad hoc task force to solve the problems of the European Union have not caused much enthusiasm on the part of the American side to amend the controversial legislation.

Head of the center Center for the study of strategic planning IMEMO them. EAT. Primakov Institute of the Russian Academy of Sciences, Candidate of Political Sciences Sergey Kislitsyn notes that the trade confrontation between the US and the EU has always been.

– Duties were introduced on both sides, there are a number of restrictions now, for example, on the supply of American agricultural products to the European Union, because there are a number of inconsistencies in norms and standards.

This is a normal phenomenon for transatlantic relations, I would not expect it to be something serious and critical for bilateral cooperation. Moreover, both sides are well aware that they must regulate their economies, their trade, protect, first of all, their interests, because there is no single transatlantic space in the way it was supposed to be created – a transatlantic trade and investment partnership, a free trade zone. Accordingly, the parties protect their interests by rules that may discriminate against the other party.

On the other hand, they are well aware that bilateral cooperation, trade and investment is the basis of transatlantic relations. Now they are actively working within the framework of, for example, the trade and technology council of the US and the EU, in which negotiations are underway to avoid further contradictions on new emerging disputes, for example, within the digital economy.

Accordingly, there may be such a phenomenon – someone will suffer losses, but this will not be of critical importance, because there is an understanding, and this is a very important part of US policy – the formation of an anti-Chinese bloc, and the EU plays a crucial role here. Looking ahead, the most important task is to unite the European Union with the American, Pacific partners within the framework of a strong bloc.

“SP”: – Apparently, the greatest concern is connected with the European auto industry and “green technologies”. The EU fears that US measures will lead to the “flight” of European companies to the United States.

– There will not be much speculation. The experience of observing such contradictions shows that the parties are trying to resolve them. In any case, while the Joe Biden administration is in the White House, there will be attempts to negotiate. If this happened under conditional Republicans in the White House, then the situation would certainly be tougher. The Biden administration is largely seeking to consolidate some aspects of cooperation and formats for settling disputes.

This is an important foreign policy task of the administration, I think, in order to further block the possibility of a rollback on a number of decisions by the Republicans. If they come, then there will immediately be a withdrawal from the Paris Agreement, the curtailment of the trade and technology council, a very important informal format of interaction.

Deputy Director of the Institute of Europe RAS Vladislav Belov believes that there will be no trade war between the US and the EU.

– There will be dissatisfaction, some part of the companies will decide to move to the USA. So far, the American space is more profitable in terms of taxes, various fees, plus support. Europe is snapping, but there is also resentment against Germany, which has adopted its billion-dollar bailout package.

“SP”: – France some time ago began to express dissatisfaction with the economic steps of the United States, Germany is also dissatisfied. Can these and other EU countries take measures similar to the US law to reduce inflation?

– Not. No money. If they could, they would have already accepted. In Germany, the situation is better, in France, Italy, Spain there is a very large public debt. They could, of course, do it, but it is too much for them. This is a clear increase in public debt, so they are unhappy with both Germany and the United States, which spit on public debt. Of course, this will not improve relations, but it will not worsen either.

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