Von der Leyen Calls for Changes Over US Protectionism

Von der Leyen Calls for Changes Over US Protectionism

In the conflict over the US subsidy policy, EU Commission President Ursula von der Leyen has called for a change of course in European investment policy.

Von der Leyen proposes, among other things, to relax the EU regulations for public investments. In addition, she said in a speech at the College of Europe in Bruges that additional European funds must be made available to promote clean technologies. Von der Leyen also mentioned cooperation with the USA on industrial standards and purchasing critical raw materials.

Von der Leyen did not say how much additional money the EU should provide. In concrete terms, however, she suggested that the existing REPowerEU program should first be expanded. In particular, this enables investments in energy efficiency, renewable energy and the infrastructure of the Energy Union. In the medium term, money should be made available for upstream research, innovations and strategic projects via the sovereignty fund she proposed back in September.

The US law “to reduce inflation”, which has been criticised in Europe, envisages investments of around 369 billion dollars. It aims to build a new industrial ecosystem in strategic clean energy sectors. Subsidies and tax credits exist when companies use US products or produce in the US. This is seen as discriminatory and incompatible with World Trade Organisation (WTO) rules in the EU.

Among other things, von der Leyen criticised the “double advantages” of US car manufacturers: “As a consumer in the United States, you receive a tax reduction when buying electric vehicles if the vehicles were manufactured in North America,” von der Leyen said. “And if you’re a manufacturer of batteries for those same electric vehicles, you get a tax break if you manufacture in the US.”

In addition, this could also pull critical components and raw materials into the USA and withdraw them from the transatlantic supply chains. “We are already seeing how this could affect Europe’s own clean technology base by redirecting investment flows,” von der Leyen warned. However, the same competitive conditions would have to prevail in this competition.

With a view to cooperation with the USA, von der Leyen proposed, among other things, establishing a “Club for Critical Raw Materials”. She said that China now controls the production and processing of certain critical raw materials. Cooperation with partners and allies in sourcing, production and processing could make it possible to break the monopoly.

How the EU countries will react to von der Leyen’s proposals is eagerly awaited. The federal government has repeatedly emphasised that it does not need new pan-European investment programs. In addition, member states have repeatedly argued that violating WTO rules should not be answered by relaxing their own standards.

Image by European Parliament (Flickr)/ Attribution 2.0 Generic (CC BY 2.0)

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