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EU and US hail progress on semiconductors amid tensions over green subsidies

The National logo The National 06/12/2022 Sunniva Rose

Senior European Union and US officials have welcomed progress on semiconductors issues at a meeting but failed to resolve overall grievances about a US green subsidy scheme that the EU says discriminates against European industries.

“I think we have achieved quite a remarkable agreement on semiconductors, on how to prevent shortages, on how to make sure that we have an overview as to what to count, but also on transparency and subsidies,” said the European Commission's Executive Vice President Margrethe Vestager.

US Commerce Secretary Gina Raimondo said that the two sides were collaborating on an “early warning system for supply chain disruptions”.

Brussels in February presented a €42 billion ($44.2 billion) investment plan in semiconductors to end its dependency on Asian producers following disruptions in the supply chain during the Covid-19 pandemic.

US Secretary of State Antony Blinken hailed the close partnership between the EU and the US displayed at the third joint Trade and Technology Council, saying they were building “ever greater convergence on some of the most critical issues of our time.”

Yet strong tensions between the two sides remain over a US stimulus package adopted by US Congress in August called the Inflation Reduction Act (IRA) which senior European officials and politicians have repeatedly criticised.

The bill provides $370 billion towards reducing greenhouse gas emissions by 40 per cent by 2030 in the form of tax cuts and significant subsidies for US-manufactured electric vehicles, batteries and renewable energy projects.

Europe fears that the IRA will transfer investments from Europe — which is already suffering from sky-high energy prices due to the war in Ukraine — to the US.

EU Commission President Ursula von der Leyen on Sunday said that Brussels must take action to rebalance the playing field where the IRA or other measures create distortions.

French Economy Minister Bruno Le Maire and the head of the European Parliament's trade committee, Bernd Lange, have both publicly stated that the EU should issue a formal complaint at the World Trade Organisation.

US President Joe Biden last week promised to French President Emmanuel Macron that there would be “tweaks” to the law to make it easier for European countries to participate in the credits, but it remains unclear how changes would be implemented.

An EU-US task force has been working on resolving the dispute. It only has a few weeks left to find a solution before the IRA comes into force on January 1.

Mr Blinken said the task force was working “efficiently” and that discussions had centred on IRA’s electric vehicle tax credit and commercial vehicle tax credit.

“We are committed to moving forward together, not at the expense of each other but for the benefit of each other,” he said.

A rack of 300mm silicon semiconductor wafers inside a sorting machine at the Globalfoundries Inc semiconductor fabrication plant in Dresden, Germany. Bloomberg © Provided by The National A rack of 300mm silicon semiconductor wafers inside a sorting machine at the Globalfoundries Inc semiconductor fabrication plant in Dresden, Germany. Bloomberg

The IRA offers consumers tax credits of $7,500 for new purchases of Tesla, Ford and other North American-made electric vehicles.

Ms Vestager struck an optimistic tone, arguing that the IRA indicated that the US “is fully engaged in fighting climate change”.

“I think that is absolutely the best news,” she said. “The most important message I think for everyone is that we’re together in what is needed to fight climate change.”

The EU’s Trade Commissioner Valdis Dombrovskis said that he left the TTC meeting “slightly more optimistic” than when he had entered it.

But he remained cautious.

“We also know that the Inflation Reduction Act has a number of provisions that enter into force already as of January 1 next year so we still have a lot of work to do,” he said, adding that he hoped that the joint EU-US task force would deliver “concrete results” in the last weeks of this year.

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