The European Union is planning to urgently boost its core industries amid fears that new US subsidies could ruin European businesses in future, Germany’s Economy Minister Robert Habeck said.
The minister said he was working “closely” with officials in Brussels and colleagues in Paris to develop measures that would allow European manufacturers to use domestic products or technologies to qualify for EU state subsidies. be required to use.
It would represent a controversial measure that goes against the traditional free-trade rulebook. But such radical intervention is being seen as necessary in Berlin, Paris and Brussels to avoid Joe Biden’s tax and subsidy reforms as well as a mass exodus of high-value investment from Europe. high energy prices in Europe.
Habeck said there are only “weeks” left before it’s too late to respond to the challenge posed by Biden anti-inflation lawThat paves the way for subsidies and tax breaks worth $369 billion for American green businesses.
“There are a lot of materials on the market, and now they are quickly being put together into a response plan, a future industrial plan for Europe,” Habeck told an industrial conference in Berlin.
importantly, Habek said Europe may need to introduce so-called “local content” requirements – a concept that French President Emmanuel Macron has been promoting. Has called “European Buy”.
Such local content requirements oblige producers to use a certain amount of domestic products, technologies or raw materials in order to qualify for trade benefits such as subsidies. For example, they may define that a European wind turbine must be made with a certain percentage of steel and technologies from inside the EU. However, such provisions are seen as protectionist as they discriminate against foreign producers.
Habeck stressed, however, that such EU measures must remain in line with World Trade Organization (WTO) rules: “I would make no secret of the fact that WTO-compatible ‘local content’ could also be part of the EU’s policies.” [of the EU’s response to the Inflation Reduction Act]”the economy minister told reporters.
He also stressed the need for speed, saying that the EU’s response to US reforms should include “More Precise Funding Programs” and “rapid decision making.”
Minister’s remarks underline how Germany moving towards the French position Supporting such “Buy European” measures when it comes to attracting new investment in green technologies such as batteries or hydrogen.
Traditional trade regulations generally ban such “buy local” requirements. The traditional view is that states should not be allowed to extend benefits to their local companies that are not available to foreign producers as this would encourage governments around the world to erect these so-called protectionist trade barriers. This would be a trend that could easily lead to the collapse of the global free-trade regime, risking widespread economic damage.
Yet Habeck pointed to a possible solution that could allow the EU to enforce such “local content” clauses without breaking global trade rules: it could be done thanks to a WTO Waiver Clause which allows some defiance of the rules, as long as they are in the interest of preserving the environment.
“If you manufacture CO2-neutral technologies, it may make sense to transport them as CO2-neutral or with as little CO2 footprint as possible,” he said, describing how locally How the purchase requirement can be environmentally friendly.
Habeck also said that “Europe must recognize – as we recognized with chip production – that a certain flexibility, a certain strategic sovereignty of Europe, is also needed in the industrial production of energy products.” He vowed to develop such policies “closely together” with EU partners such as French Economy Minister Bruno Le Maire and EU Commissioner Thierry Breton.