San Francisco Frontiers - French, German ministers to tackle green subsidies with US

The aim is to discuss the impact of the Inflation Reduction Act (IRA) on European industry, with the act's controversial green subsidies and tax breaks stoking tensions between the United States and Europe.

The United States is keen to reduce dependence on Chinese imports, but the EU is concerned about collateral damage if companies are enticed by US subsidies to relocate outside the bloc.

Brussels is pushing the United States to make exemptions for European companies, but a joint task force set up to address the EU's concerns has yielded few results.

For now, negotiations are proceeding under the European Commission's leadership, and Habeck believes that he and Le Maire can contribute to finding new solutions.

"It's a sign that the two biggest economies in Europe -- Germany and France -- are standing together in this," Habeck told reporters in Washington Monday, ahead of the meetings.

While he called it a "big success" that the US government was taking action against global warming with the IRA, he added that "the problematic part of it should be solved."

The visits come after French President Emmanuel Macron's trip to Washington in December, during which Biden said the IRA was never intended to disadvantage US allies.

Le Maire and Habeck are expected to stress the need to define fair competition along the lines of reciprocity, transparency and cooperation.

The European ministers are set to meet top White House economic policy advisor Brian Deese and deputy national security advisor Mike Pyle on Tuesday morning.

They will then speak with Commerce Secretary Gina Raimondo and Treasury Secretary Janet Yellen, before meeting Democratic Senator Joe Manchin -- who was key in passing the IRA.

A Treasury official said Yellen "welcomes the visit of her counterparts," adding that the meeting was part of the United States' ongoing and sustained engagement with its European counterparts.

Yellen spoke Monday with European Commission Executive Vice-President Margrethe Vestager, and "stressed the need to stimulate technology development and deployment on both sides of the Atlantic to speed the transition to green energy and achieve our collective climate goals," the Treasury Department said.

- 'Transparency' -

The IRA funnels $370 billion into subsidies for America's energy transition, including tax cuts for US-made electric cars and batteries.

Habeck said in a statement before his trip that there is a need for "friendly, fair competition."

In an interview with AFP on Friday, Le Maire called the IRA "a game changer."

He added that it "offers competitive advantages which, coupled with very low energy prices in the United States, poses a risk to our industries."

"The most important thing is that we cooperate with allies to have transparency about the amount of subsidies and tax credits that will be granted," said Le Maire.

To head off the threat to European industry, the EU last week unveiled proposals such as a controversial relaxation of state aid rules to level the playing field.

Le Maire added on Monday that the EU was close to finalizing its response to the IRA.

Following the Washington visit, European leaders will hold a summit aimed at crafting a response to the US measures.

W.Thompson--SFF