DAVOS, Switzerland – It was a difficult balancing act for Ursula von der Leyen on Tuesday: convincing European leaders that their beleaguered companies would get cash while the EU isn’t turning protectionist.
Speaking to hundreds of CEOs, politicians and global leaders at the World Economic Forum, the President of the European Commission laid out a grand plan to keep Europe’s industry competitive in the race to attract green tech and climate-related investment.
Subtext: America’s multi-billion dollar Inflation Reduction Act, which includes a $369 billion green subsidy package, is fueling industry’s European nightmare and investment is fleeing the continent as the economy turns soporific.
Von der Leyen declared, “The next decades will see the greatest industrial transformation of our time – perhaps at any time.” “And those who develop and build the technology that will be the foundation of tomorrow’s economy will have the greatest competitive edge.”
The EU chief argued that change should happen with allies working together, not at odds.
“Our aim should be to avoid disruption of transatlantic trade and investment,” she said. “We must work toward ensuring that our respective incentive programs are fair and mutually reinforcing.”
Governments rallying to help their own industries is not the kind of message that usually goes over well at Davos. After all, the World Economic Forum is in many ways a symbol of free trade and globalization. But the US move to prop up its economy has drawn a panicked reaction from Europe, which fears it could be left behind as the world economy changes.
While many of the proposals von der Leyen listed on Tuesday have been previewed before — for example, the EU’s upcoming “sovereign fund” to help boost green and digital investment — there were few new details.
Von der Leyen announced a new Net-Zero Industry Act that would be in place by 2030. The effort will seek to increase clean-tech funding and fast-track permits for relevant production sites.
“The objective would be to focus investment on strategic projects along the entire supply chain,” she said.
She also gave new details about plans for the European Union to temporarily loosen its historically strict rules governing when governments can offer direct state aid to companies. He said the block would offer companies a more “simple tax-break model” and speed up the sign-off process for other state aid efforts.
Yet von der Leyen was careful to highlight the EU’s continued commitment to free trade – a move to calm both the international community gathered in Davos and the EU’s free-trade rush about the bloc’s subsidy shift. Step. The EU leader also stressed the need for an “ambitious trade agenda”, noting that the bloc is working to strike deals with Mexico, Chile, New Zealand and Australia – and aims to make progress with India and Indonesia. Is.
She also refrained from criticizing the United States – despite the rocky state of EU–US relations over the IRA.
“It is no secret that certain elements of the Inflation Reduction Act’s design have raised a number of concerns in terms of some targeted incentives for companies.” But a solution may be in the works, he told a packed Congress hall.
“We are working with the US to find a solution, for example, so that EU companies and EU-manufactured electric cars can also benefit from the IRA,” she said – what exactly could the EU compromise? Yes, without giving details.
let’s unite against china
Instead, he directed most of his anger at China – viewing the transatlantic subsidy race not as a competition but as an opportunity to jointly marshal Western resources against a common enemy.
Von der Leyen blasted the Asian power for heavily subsidizing its own industries and attracting companies from Europe and elsewhere on the promise of “cheaper energy, lower labor costs and a more liberal regulatory environment”, just hours before China’s Vice Premier Liu He accused of poaching.
China could essentially hold supply chains hostage, he warned, with Europe being 98 percent dependent on “one country – China” for rare earth minerals, wind power, hydrogen storage and the building blocks of batteries.
Von der Leyen stressed that the EU and the US should work together to confront these problems. She recently redefined US subsidies as the sum of money the European Union has already earmarked to help the continent meet its climate goals.
“Together, the EU and the US alone are putting forward almost €1 trillion to accelerate the clean energy economy,” she said. “We must determine how we can jointly benefit from this massive investment, for example by creating economies of scale or establishing common standards across the Atlantic.”
Yet for all her certainty, von der Leyen would struggle to reach a united European position on the subject.
Just as von der Leyen was speaking at the Davos forum, European finance ministers were in Brussels discussing how to shore up Europe’s own industrial base, with the EU divided among the 27 countries that heavily subsidize the US. How to reply to a package. Many countries believe that loosening state aid rules will benefit wealthier countries such as France and Germany, which have been able to funnel cash to struggling companies, leaving countries with fewer resources unable to compete.
The US also has not yet guaranteed that it will give European companies access to the financial incentives of the IRA.
In other words, the subsidy battle is not over yet.