German and French finance ministers warn against green tech trade conflict with the U.S.

Germany’s finance minister Christian Lindner has warned against a “trade conflict” between the EU and the U.S. as a result of the American government’s Inflation Reduction Act, news agency dpa reports in an article carried by newspaper Tagesspiegel. The policy introduced by the U.S. puts a focus on clean energy development. However, it “has serious consequences for the European economy. We need to make this clear,” Lindner said at a meeting of EU finance ministers in Brussels. The minister from the pro-business Free Democrats (FDP) instead proposed the EU “reach out” to the U.S. and seek a replacement for the failed transatlantic trade agreement (TTIP). “Perhaps now is the right time,” Linder said, adding that he is confident both sides have an interest in coming to an agreement. Otherwise, the EU “is also capable of acting,” Lindner stressed. A spokesperson of chancellor Olaf Scholz also said the government desired talks on a new trade deal with the U.S., reported Politico.

The German minister’s French counterpart, Bruno Le Maire, also takes the risk of a trade conflict seriously and appealed for a “coordinated and strong response” from the EU to U.S. policies. In an interview with business daily Handelsblatt, the French economy and finance minister said possible countermeasures by the EU could include “looking out more strictly for our own interests regarding environmental action when it comes to imports or rules that prioritise European products.” Beyond that, it would be “indispensable” for Europe to ensure lower energy prices for its economy. Challenges for Europe posed by both the U.S. and China should be addressed in close cooperation, the minister added, and rejected the idea that the French-German axis had been weakened in recent months due to the energy crisis. “The political will for collaboration between Paris and Berlin is intact,” Le Maire said. 

The Inflation Reduction Act introduced by U.S. president Joe Biden includes major investments in climate action and social welfare systems. However, the scheme ties subsidies to quotas for using products made in the U.S., such as a mandatory share for U.S.-made batteries in e-cars subject to tax rebates. The EU has said the U.S. government’s measures discriminate against the EU, as products made in Canada or Mexico are exempt from the policy. Delegates from Europe and the U.S. launched consultations on the looming trade conflict, with EU trade commissioner Valdis Dombrovskis saying first results could be expected by early December. Several years ago, talks on the last attempt at a trade deal, the Transatlantic Trade and Investment Partnership (TTIP), failed due to a lack of political backing after public protest against it especially in Germany.