EU-US Inflation Act Conflict Escalates... "Counteraction Through WTO Complaint"

Intensive Discussion on the Inflation Reduction Act at Next Month's Trade Technology Council Meeting

U.S. President Joe Biden. (Photo by Yonhap News)

[Asia Economy Reporter Jo Yujin] As the European Union (EU) considers countering the discrimination issue in the US Inflation Reduction Act (IRA) electric vehicle subsidies by filing a complaint with the World Trade Organization (WTO), concerns are rising that the retaliatory tariff war from the Donald Trump administration era could reignite.

According to US political media Politico on the 20th (local time), French President Emmanuel Macron is expected to meet with US President Joe Biden in Washington on the 1st of next month to discuss the discrimination issue in the IRA electric vehicle subsidies. Earlier, President Macron met with German Chancellor Olaf Scholz in Paris on the 26th of last month, where they agreed that the IRA’s electric vehicle subsidies constitute market-distorting measures and decided to take a tough stance.

At the end of last month, Chancellor Scholz hinted for the first time that if the EU fails to reach a solution through negotiations with the US, it may respond through its own tax reductions and support measures. While he does not support the 'Buy European Act' proposed by President Macron (a subsidy law for European manufacturers), he stated that the EU will not simply endure losses when faced with unfair competition.

The EU is concerned that the implementation of the US IRA will shrink investment by European companies. Especially amid deteriorating production conditions due to the Ukraine crisis causing energy prices to soar to record levels, the IRA places them in an even more disadvantageous position. In fact, US electric vehicle company Tesla had planned to manufacture batteries at its Berlin plant but decided to move battery manufacturing equipment to the US due to the IRA’s tax credit issues.

Facing difficulties in reaching a negotiated solution, the EU is seeking to file a complaint with the WTO. Bernd Lange, Chair of the European Parliament’s Trade Committee, stated, "If we fail to reach an agreement with the US, we must respond with WTO complaints and retaliatory tariffs." Lange urged swift action, noting that with the IRA’s implementation imminent, "once the law is enacted, it will be difficult to bring about any changes (to the law)."

The EU held the first task force (TF) meeting with the US last month to negotiate resolving the IRA electric vehicle subsidy discrimination but failed to narrow differences. Politico reported that amid the unified front of the Russia-Ukraine war and trade sanctions against China, the possibility of a trade war between the two sides is rising, drawing attention to the outcome of the 3rd US-EU Trade and Technology Council (TTC) high-level meeting scheduled in Washington on the 5th of next month.

Meanwhile, Thierry Breton, EU Commissioner for Internal Market, has proposed establishing a 'European Solidarity Fund' to build a self-reliant foundation in key industries such as batteries and semiconductors, reflecting voices within the EU calling for its own subsidy programs.

This content was produced with the assistance of AI translation services.