If you’re wistful for the glory days of the Airbus-Boeing bust-up — with the transatlantic aircraft subsidies tussle suspended after 17 years of World Trade Organization litigation — then a dispute over green tech has ambitions to fill the gap.Joe Biden’s Inflation Reduction Act (IRA), which emerged out of the congressional mire to become law in August, has worried the EU. It contains blatantly discriminatory measures, offering US consumers tax credits to buy electric vehicles only if they’re assembled in North America. It also requires critical minerals and batteries increasingly to be bought from North America or a country with which the US has a preferential trade agreement, and deters sourcing from high-risk countries such as China.
As subsidy races go, this could be politically nastier than Airbus-Boeing, which was essentially about competition between aircraft produced in their companies’ home countries in a mature industry. The electric vehicle credits might directly shift jobs by encouraging European and Asian car companies to set up in the US in a fast-developing sector with early mover advantage.
That would come at a very bad time for Europe, already threatened with rapid deindustrialisation by its particularly severe version of the Ukraine energy price shock. Nor is it a one-off: EU officials note there are other programmes of concern in the IRA, such as government support for green hydrogen, not to mention the potential transatlantic subsidy race in semiconductor production.