Trade tensions are brewing underneath the calm surface of the Trans-Atlantic alliance.
- Last week, senior EU official Thierry Breton dropped out of the latest US-EU Trade and Technology Council (TTC) meeting, a body set up last year to foster US-EU cooperation on tech and trade.
According to Breton, the TTC “no longer gives sufficient space to issues of concern to many European industry ministers and businesses” and was, therefore, hardly worth the 8-hour flight from Brussels to Washington.
The past ten months have brought the US and EU closer in lots of ways – but trade policy is not one of them.
The EU feels particularly blindsided by the US’s ‘Inflation Reduction Act’ (IRA), a big package of subsidies to promote American manufacturing in green sectors like batteries and electric vehicles. Europe fears the IRA will set off a subsidies race that it cannot win.
That’s not all: Several EU officials have privately complained that US companies are profiting from the Russo-Ukraine War. As one unnamed official told Politico:
“the country that is most profiting from this war is the U.S. because they are selling more gas and at higher prices, and because they are selling more weapons”.
Meanwhile, the US is frustrated with the EU’s weak stance with China. According to analyst Julian Ringhof:
“The Biden Administration […] is dissatisfied with the EU’s hesitance to leverage the TTC more aggressively against China”.
Unfortunately, the TTC’s original mission has been obscured by all the talk of competition, but a solution might be on the horizon.
1. Reality seems to have set in for Brussels, which has adopted a more conciliatory tone towards Biden’s green subsidies.
EU Commission President Ursula von der Leyen recently promised to offer companies financial support and incentives to remain in the EU.
But the EU can’t make it rain quite like the US, so some (including no-show commissioner Thierry Breton) want to set up a ‘common green investment fund’.
2. 😘 The US and EU don’t really have a choice but to kiss and make up.
Neither side would be well-served by a trade war. The EU is already facing an energy crisis at home, and the US will do what it can to safeguard transatlantic solidarity.
As French President Emmanuel Macron put it:
“The circumstances mean that we have no alternative but to work together.”
*For more on this story, check out the latest episode of “Intrigue, Explained” with Intrigue co-founder John Fowler!*