What Macron will do to counter Biden’s subsidies to US companies
Macron will meet Biden to discuss the Inflation Reduction Act, to which Europe could respond with its own subsidy plan. The French president will try to exploit China as a lever and to extract better prices for LNG
Accompanied by foreign, defense and finance ministers, as well as a group of industrialists and astronauts, French President Emmanuel Macron will be in Washington today, where he will meet his US counterpart Joe Biden.
THE CONTRAST BETWEEN FRANCE AND THE UNITED STATES
There will be many topics for discussion, but the priority ones – and very complicated, despite the alliance – are basically two.
The first is the war in Ukraine: Paris is in favor of Kiev's support, but its concrete support in terms of armaments has been scarce ; Macron then insists a lot on the need for a dialogue with Russia.
The second – and more urgent, for France – is the Inflation Reduction Act: it is the great anti-inflation law signed by Biden in August, whose subsidies to American manufacturing are perceived as a danger by the European Union . According to Brussels, the aid offered by the White House reduces Europe's competitiveness – moreover at a time of energy price crisis – and could encourage the relocation of European companies to the United States, causing a deindustrialization crisis in the Old Continent.
THE WORDS OF LE MAIRE
French Economy and Finance Minister Bruno Le Maire said on Sunday that France could ask the Biden administration for exemptions from some tariffs and restrictions in the Inflation Reduction Act. kind of globalization awaits us?” he added .
According to Le Maire, “China favors Chinese production, America favors American production; it is time for Europe to favor European production. All European states must understand that today, faced with these American decisions, we must learn to better protect and defend our economic interests".
MACRON'S POSITION
Macron thinks that the European Union should respond to Biden's Inflation Reduction Act with a "Buy European Act", i.e. a law to subsidize European production.
“Europe”, argues the president, “cannot be the only place in the world that does not have a Buy European Act and the only place in the world where there is still a state aid system that establishes rules as if there was no external competition”.
MACRON WILL LEVERAGE CHINA
A French diplomat told Reuters that Macron will aim to convince Biden that it is not convenient for the United States to economically weaken its European allies at a time of competition with China, America's great political rival.
“The message will be: there is obviously a Chinese challenge and we [the French, ed ] can help the other members of the European Union get out of their naiveté on this issue,” the diplomat said, possibly referring to Germany . “But you can't ask us to help you with China and put an Inflation Reduction Act on us,” he added.
EXEMPTIONS FOR EUROPEAN COMPANIES?
According to a presidential adviser, Macron will try to negotiate with Biden exemptions for European companies similar to those granted to Canadian and Mexican companies.
The Inflation Reduction Act, for example, provides tax credits of up to $7,500 only for electric vehicles assembled in North America and containing batteries manufactured in the region; all the others – for example those manufactured in Europe or South Korea – will not be able to access the bonuses, losing them in price competitiveness.
The measure particularly worries German automakers, which export a lot to the United States. In France, however, the anti-inflation law does not affect vehicle manufacturers, who do not export to America, as much as those of car components.
THE COMMENT OF CERRETELLI ( SOLE 24 ORE )
In Il Sole 24 Ore the journalist Adriana Cerretelli, an expert on European affairs, describing the clash over subsidies between Brussels and Washington evoked by Macron, wrote that "Europe is disarmed: it has the ambitions but does not give itself the resources and not even the cohesion political and economic necessary to achieve them. So he risks self-harm if he chooses the confrontation with America anyway”.
In fact, while France is pushing for a Buy European Act, other more liberal countries, such as Germany or the Netherlands, are skeptical about the introduction of a Community program of state aid to businesses. So do the more liberal commissioners of the European Commission such as Valdis Dombrovskis (Trade) and Margrethe Vestager (Competition).
“Insulting European sovereignty?” asks Cerretelli, referring to the Inflation Reduction Act. “Yes. But we had to think about it first." A few weeks ago an anonymous European official had expressed a similar thought to the Financial Times : "we have designed our rules to be open and not give preferences to European companies: now we are victims of our own purism".
THE PRICE OF LNG
During his visit to the United States, Macron will also travel to Louisiana : many liquefied gas (LNG) exporting companies are based in the state, located on the Gulf of Mexico; the French oil company TotalEnergies owns a large terminal here.
Macron has complained about the high prices of gas sold by the United States to Europe, and has made it known that he will discuss the matter with Biden. “The United States produces cheap gas but sells it to us at high prices. And what's more, they have massive subsidies in some areas that make our projects uncompetitive. I don't think it's a friendly thing,” he added. “I will go to Washington in the spirit of friendship to simply ask for a level playing field,” he said.
Last month, Minister Le Maire had already declared that "we cannot accept that our American partner sells us its LNG at a price four times higher than that at which it sells it to its own companies".
However, it is not the US government that sells LNG to Europe, or any other region or country in the world, but private companies. Furthermore, in the absence of supply contracts, the price of gas is determined by the market in which it is sold: the United States government has no power to modify them.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/visita-macron-stati-uniti-sussidi/ on Tue, 29 Nov 2022 09:30:44 +0000.