The “race for subsidies” is “contrary to all the rules of international trade” and American subsidies call for a “coordinated, united and strong” response from Europeans, said French Economy Minister Bruno Le Maire in an interview.
“Some large foreign companies that wanted to set up in Europe are now hesitating between European sites and American sites”, declared Mr. Le Maire in an interview with the four European newspapers Les Echos, Handelsblatt, El Mundo and Corriere della Sera, updated online Sunday evening.
“In some cases, the amount of grants the Biden administration is offering is four to ten times the maximum amount allowed by the European Commission,” he said. “In France, our first estimates indicate that 10 billion in investments and thousands of industrial jobs are at stake,” he added.
“Our industry is already suffering from a lack of competitiveness linked to the differences in energy prices between the United States and Europe,” he lamented. “Massive subsidies under the US Inflation Reduction Act (IRA) and equally heavily subsidized Chinese competition are likely to widen this gap further.”
The American Inflation Reduction Act, so named for current events but which is in reality an environmental and social reform program, is a multi-hundred billion dollar investment plan.
Bruno Le Maire called for a “coordinated, united and strong response from the European Union vis-à-vis our American allies. Only firmness will allow us to obtain results”.
He says he expects “firm and proportionate proposals from the European Commission”, in particular “a stricter affirmation of our environmental interests”, “European preference schemes or the acceleration of the use of reciprocity instruments”.
He also underlined that a “restrictive monetary policy is not compatible with an expansionary budgetary policy”, that one should not “support demand without limit”, but “move towards more targeted aid”.
Finally, he estimates that, “at the end of this energy crisis, we will have a level of inflation probably higher than what we have known for the last decades”, “because the relocation of our production (…) and the decarbonization of the economy will structurally increase the cost of certain products”.