Concerns Over Full-Scale 'Trade War' Between US and EU
EU Eases Subsidy Regulations for Domestic Companies and Expands Public Investment
Ursula von der Leyen, President of the European Commission, made a determined statement regarding the U.S. Inflation Reduction Act (IRA) set to take effect next year, saying that the EU must respond with a 'European-style IRA.' While emphasizing that there should be no 'trade war' among key allies amid the Ukraine war, she reaffirmed her intention to ease subsidy regulations for companies within the EU and to expand public investment.
On the 14th (local time), she attended the European Parliament plenary session and stressed that Europe can no longer rely on cheap Russian energy due to the Ukraine war and that it is time to transform Europe's industrial model to one based on clean and renewable energy.
She pointed to the U.S. IRA as one of the causes of intensifying global competition. This was seen as a call for countermeasures ahead of the EU Council (summit) scheduled for the following day. President von der Leyen highlighted the "Buy American" policy, discriminatory tax reduction benefits, and subsidies for North American-made products, emphasizing that "the IRA risks causing unfair competition." She said, "We must respond with our own European-style IRA" and "strengthen the industrial base built on Europe's clean technologies."
She stated, "It is necessary to make investment subsidies and tax reductions in critical areas easier and faster," and announced plans to unveil a new scheme next month to simplify and expedite subsidy payment regulations. She added, "For some clean sector investments, member states may also match subsidies with third countries," emphasizing that "this will motivate companies to continue investing in the EU rather than in the U.S., and to remain investing within the EU."
She also reaffirmed the intention to establish a 'European Sovereignty Fund.' The European Sovereignty Fund is a fund aimed at strengthening the future competitiveness of European industries and is expected to be included in the EU Commission’s multiannual financial framework (MMF) to be announced around next summer.
The EU has so far imposed strict conditions on subsidies to companies, citing concerns that subsidies could cause unfair competition. However, amid the energy crisis triggered by Russia and the inevitable transition to clean and renewable energy, concerns have grown that the U.S. IRA could become an obstacle to attracting investment within the region. The EU intends to ease subsidy payment regulations and expand public investment to protect its industries.
However, President von der Leyen left room for continued close consultations with the U.S. administration regarding the 'most concerning aspects' of the IRA. She cited critical raw materials needed for clean technologies, saying, "Currently, some of the most urgent critical raw materials are controlled by one country, China," and added, "The concerns about such vulnerabilities are shared by both the U.S. and us."
Emphasizing that the Ukraine war is ongoing, she said, "Now is not the time to engage in a trade war with our closest partners and allies," and "Democratic countries must unite more strongly to support Ukraine."
The EU leaders gathered that day plan to focus on discussing measures to protect regional industries in response to the U.S. IRA. They will also address support plans for Ukraine and additional measures in response to soaring energy prices.
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