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Trade war averted? Macron asks Biden to ‘modify’ his industrial subsidies – POLITICO

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French President Emmanuel Macron snatched an unexpected victory from his American counterpart during a visit to Washington on Thursday, leading Joe Biden to suggest that European companies could benefit from a controversial package of American subsidies.

Fury boiled over in Europe after it became clear that Biden’s Cut Inflation Act – a $369 billion package for green industry – could drain investment out of the EU and into United States. Major auto-making nations like France and Germany had complained that the U.S. law was potentially illegal because it discriminated against foreign companies in the electric vehicle business and encouraged consumers to “buy American.”

Macron’s visit to the United States was seen as a doomed last-ditch effort to secure a truce on Washington’s largesse before the EU and the United States embarked on a subsidy race or war large-scale trade with compensatory tariffs.

Europeans lobbied for the same rights as Mexicans and Canadians to benefit from the green money bonanza, but with little chance of success. For weeks, the French have campaigned for European partners to agree to their own rival subsidy package, including a “Buy European” component.

To an affable press conference with Macron on Thursday, however, Biden conceded far more ground than previously thought possible.

“There are adjustments we can make that can fundamentally make it easier for European countries to participate and, or be alone, but that’s something that has to be worked out,” the US president said. “It was never my intention to exclude people who were cooperating with us. That was not the intention. We are back in business, Europe is back in business. And we will continue to create manufacturing jobs in America, but not at the expense of Europe.”

This question of the exclusion of Europe has been one of the main bones of contention. At a time when Europe is paying dramatically higher energy prices than the United States, many Europeans saw the Inflation Reduction Act as a hostile attempt to take advantage of European weakness.

Several senior European officials have argued that the EU and the United States should join forces against China instead of competing with each other.

That logic seemed to catch on with Biden. While making “no apologies” for the legislation which he said was vital to job creation in the United States, he noted that parts of the IRA might need a fix. “There are obviously going to be glitches and [we] need to reconcile changes to it,” he said.

He said exemptions had been granted to companies that had free trade agreements with the United States, but suggested this should be extended more generally to “allies”.

“We can work on a lot of things,” he continued.

Macron also seemed optimistic about how things went.

“We had a very good discussion on the IRA and we decided to synchronize our approaches… as well as our investments, because we share the same strong desire to secure our industries,” Macron said.

It remains to be seen, however, how much can be achieved in practice and whether Biden makes more concessions in his friendly public appearance with Macron than he really will be able to. He will, for example, be likely to face congressional hostility to attempts to backtrack and play with an initiative as historic as the IRA.

It’s unclear how far the Biden administration will go to resolve the Europeans’ issues on a technical level, as teams on either side have yet to work out the details. The US president said the two leaders had agreed to allow their teams to “follow” their decisions.

This passes the fine print to an EU-US task force tasked with leading talks to try to resolve differences over the package, but EU officials have expressed doubts about the progress that can be made on this. level.

For the French, Biden’s unexpected concession paradoxically risks undermining Macron’s campaign at home to get the EU to roll out its own protectionist response to the IRA.

Ahead of the visit, a Macron adviser told the press that the answer to the IRA ‘ultimately lies in Europe’s ability to show that it can compete…and that is the’ Buy European Act'”.

French Finance Minister Bruno Le Maire is expected to continue trade talks with US officials on Friday.

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