French President Emmanuel Macron’s discussions with U.S. President Joe Biden have resulted in a “major breakthrough” to avert a “subsidies race” between the two sides of the Atlantic, France’s finance minister said on Friday.
Macron took advantage of his state visit in Washington this week to press the United States to find ways to soften the impact of the U.S. Inflation Reduction Act (IRA), a massive subsidies package which Europeans fear could derail their own industrial recovery.
“I really think the state visit of the French president in Washington is a turning point,” French Finance Minister Bruno Le Maire told Reuters and the Financial Times in a joint interview.
“I think there’s now a real awareness (of the issue), recognition by the U.S. administration, but also by Congress,” he said in Washington.
Biden said in a joint news conference with Macron on Thursday that “tweaks” could be applied to the way the legislative components of the IRA are implemented to prevent European countries from being hurt by its consequences.
“For example, there’s a provision in it that says that there is the exception for anyone who has a free trade agreement with us,” Biden said on Thursday. “That was added by a member of the United States Congress who acknowledges that he just meant allies; he didn’t mean, literally, free trade agreement. So, there’s a lot we can work out.”
In the interview with Reuters, Le Maire said the fact Biden suggested allies could be treated like countries with a trade deal, such as Canada and Mexico, was a “major breakthrough” that came from intense discussions between French and U.S. officials.
“It’s a major breakthrough to say: they’re our allies, they’re our friends. So even if we don’t have a trade deal with Europe, we’re going to consider European components the same way as those from countries with a trade deal,” Le Maire said.
“It’s not an adjustment, it’s an important political choice.”
French officials say technical work will continue in the coming days and weeks to see how to translate that into regulation, but they believed executive orders by the Biden administration could be the conduit for the “tweaks”.
In Washington, Macron, Le Maire and other French officials went on a lobbying offensive targeting U.S. officials from all branches of power, from the White House to Capitol Hill, with Macron warning U.S. lawmakers from both sides of the aisle in a meeting behind close doors that the IRA was seen as “super aggressive” by European companies.
Asked whether Macron had brandished the threat of an appeal to the World Trade Organisation, Le Maire said he did not have to, and that the United States under Biden was very keen to work with European allies, especially as China was a common rival.
“Nobody wants a trade war in the situation we’re in,” Le Maire said. “We have one competitor called China. The strategic goal of the United States, it seems to me, is not to weaken Europe but, on the contrary, to work in partnership with Europe.”
Le Maire said he had also been working in coordination with his German counterpart, Economy Minister Robert Habeck.
German carmakers are among the biggest potential victims of the IRA, which provides big subsidies to U.S.-made electric cars. French car parts companies such as Valeo, which supply German carmakers, would also have suffered.
Le Maire said that although the impact of the U.S. package could now be mitigated, the episode showed Europe was too slow to encourage investment in the technologies of the future, with instruments that could take two years to provide subsidies to industry, when U.S. tax credits were instant.
“It’s up to us, Europeans, to put our own house in order,” he said.
