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The US government by the last days of December acknowledged a beneficial European automotive companies approach to the American market according to the US Commercial Clean Vehicle Credit scheme under the Inflation Reduction Act, IRA. The guidance, in part, reflects the constructive US approach in the work of the EU-US IRA’s Task Force; besides, the EU companies are being able to immediately benefit from the new guidance. Discussions on other vital issues in bilateral relations will continue…
The EU and the US are having the most integrated economic relationship within the largest bilateral trade and investment relationship in the world. Although overtaken by China in 2020 as the largest trading partner in goods, specifically, when services and investment are taken into account; however, the US remains the EU’s largest trading partner so far.
The EU-US transatlantic relationship is a vital element in the world economy, as both entities are, in fact, representing the largest trade and investment partners in almost all parts of the global economy. Presently, the EU-US economies account for one third of global trade in goods and services and close to one third of world GDP in terms of purchasing power.
On IRA and automotive bilateral competition
The US Inflation Reduction Act, IRA signed into law on 16 August 2022, offers generous commercial and trade like financial incentives to support the American green transition.
In the case of so-called clean vehicles, the two main incentives are tax credit programs: one for commercial operators and one for private consumers.
The consumer tax credit contains several provisions, including local content, production or assembly requirements, which were regarded discriminating against the EU-wide automotive producers, thus risking weakening competition and raising prices.
The EU strongly objected to this IRA’s part; as a result, both sides agreed to establish the EU-US Task Force on the IRA’s “revision” in October 2022. Both sides were working hard to address the EU member states’ concerns over IRA’s discriminating content for the bilateral constructive relations.
Under the new US guidance within the adopted Commercial Clean Vehicle Credits is enabling the EU automotive companies and producers to proceed in the US market without requiring specific allowances.
According to the European Commission, the “reached solution” is a win-win for both sides, as it strengthens EU-US cooperation in the shared goal of combating climate change and bolsters transatlantic supply chains: i.e. the US taxpayers will be able to take advantage of highly efficient EU-made electric vehicles and components, while the EU companies that provide their customers through leases with cutting-edge clean vehicles will benefit from the incentives under the IRA.
The Commission welcomes the US moves; though more time will be needed to work on other vital issues of bilateral interests.
Reference to: https://ec.europa.eu/commission/presscorner/detail/da/ip_22_7869
The EU institutions during last months of 2022, tried to reach non-discriminatory treatment of EU clean vehicle producers under the IRA’s Clean Vehicle Credits; the situation remained of concern to the EU leaders, as it contained discriminatory provisions which de facto excluded the EU companies from the American market. Discriminating against EU produced clean vehicles and inputs violated also international trade law and unfairly disadvantaged EU companies on the US market, reducing the choices available to the US consumers and ultimately damaging the “climate effectiveness of the green subsidies”.
Further work is going on in the EU-US IRA’s Task Force to find solutions to European concerns, for example by treating the EU the same way as all US FTA partners.
More information on the EU-US trade policy in: https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/united-states_en#:~:text=The%20United%20States%20remains%20the,more%20than%20500%20billion%20euro.