But the elephant in the Oval Room will be the U.S. Inflation Reduction Act (IRA). Europeans say the massive subsidy package to U.S. manufacturers could deal a lethal blow to their industries, which are already reeling from high energy prices..
Macron will try to convince the United States it is in their interest not to weaken European companies at a time Western allies are facing intense economic competition from China, which they say uses its economic might as diplomatic leverage.
The French leader will try to negotiate exemptions for European companies on the model of those Mexico and Canada has already got, a French presidential adviser said.
German carmakers, for which the U.S. is a big export market, are among the biggest victims of the IRA package which subsides U.S.-made electric cars, the French presidential said. French carmakers do not export to the U.S. but France has major car parts suppliers, which would be affected.
Energy issues will also feature prominently in the talks at the White House, with France hoping to boost nuclear energy cooperation.
Top European officials are furious with Joe Biden’s administration and now accuse the Americans of making a fortune from the war, while EU countries suffer.
“The fact is, if you look at it soberly, the country that is most profiting from this war is the U.S. because they are selling more gas and at higher prices, and because they are selling more weapons,” one senior official told POLITICO.
The explosive comments — backed in public and private by officials, diplomats and ministers elsewhere — follow mounting anger in Europe over American subsidies that threaten to wreck European industry.
“We are really at a historic juncture,” the senior EU official said, arguing that the double hit of trade disruption from U.S. subsidies and high energy prices risks turning public opinion against both the war effort and the transatlantic alliance. “America needs to realize that public opinion is shifting in many EU countries.”
Another top official, the EU’s chief diplomat Josep Borrell, called on Washington to respond to European concerns. “Americans — our friends — take decisions which have an economic impact on us,” he said in an interview with POLITICO.
The U.S. rejected Europe’s complaints. “The rise in gas prices in Europe is caused by Putin’s invasion of Ukraine and Putin’s energy war against Europe, period,” (LIE) a spokesperson for Biden’s National Security Council said. Exports of liquefied natural gas from the U.S. to Europe “increased dramatically and enabled Europe to diversify away from Russia,” the NSC spokesperson said.
While enabling the US companies to make massive profits
The biggest point of tension in recent weeks has been Biden’s green subsidies and taxes that Brussels says unfairly tilt trade away from the EU and threaten to destroy European industries. Despite formal objections from Europe, Washington has so far shown no sign of backing down.
As they attempt to reduce their reliance on Russian energy, EU countries are turning to gas from the U.S. instead — but the price Europeans pay is almost four times as high as the same fuel costs in America. Then there’s the likely surge in orders for American-made military kit as European armies run short after sending weapons to Ukraine.
It’s all got too much for top officials in Brussels and other EU capitals. French President Emmanuel Macron said high U.S. gas prices were not “friendly” and Germany’s economy minister has called on Washington to show more “solidarity” and help reduce energy costs.
Ministers and diplomats based elsewhere in the bloc voiced frustration at the way Biden’s government simply ignores the impact of its domestic economic policies on European allies.
When EU leaders tackled Biden over high U.S. gas prices at the G20 meeting in Bali last week, the American president simply seemed unaware of the issue, according to the senior official quoted above
Officials on both sides of the Atlantic recognize the risks that the increasingly toxic atmosphere will have for the Western alliance.
The growing dispute over Biden’s Inflation Reduction Act (IRA) — a huge tax, climate and health care package — has put fears over a transatlantic trade war high on the political agenda again. EU trade ministers are due to discuss their response on Friday as officials in Brussels draw up plans for an emergency war chest of subsidies to save European industries from collapse.
“The Inflation Reduction Act is very worrying,” said Dutch Trade Minister Liesje Schreinemacher. “The potential impact on the European economy is very big.”
“The U.S. is following a domestic agenda, which is regrettably protectionist and discriminates against U.S. allies,” said Tonino Picula, the European Parliament’s lead person on the transatlantic relationship.
An American official stressed the price setting for European buyers of gas reflects private market decisions and is not the result of any U.S. government policy or action. “U.S. companies have been transparent and reliable suppliers of natural gas to Europe,” the official said. Exporting capacity has also been limited by an accident in June that forced a key facility to shut down.
In most cases, the official added, the difference between the export and import prices doesn’t go to U.S. LNG exporters, but to companies reselling the gas within the EU. The largest European holder of long-term U.S. gas contracts is France’s TotalEnergies for example.
The NSC spokesperson quoted above added: “The increase in global LNG supplies, led by the United States, helped European allies and partners get storage levels to an encouraging place ahead of this winter, and we will continue to work with the EU, its members, and other European countries to ensure sufficient supplies will be available for winter and beyond.”
“The United States sells us its gas with a multiplier effect of four when it crosses the Atlantic,” European Commissioner for the Internal Market Thierry Breton said on French TV on Wednesday. “Of course the Americans are our allies … but when something goes wrong it is necessary also between allies to say it.”
Cheaper energy has quickly become a huge competitive advantage for American companies, too. Businesses are planning new investments in the U.S. or even relocating their existing businesses away from Europe to American factories. Just this week, chemical multinational Solvay announced it is choosing the U.S. over Europe for new investments, in the latest of a series of similar announcements from key EU industrial giants.
Allies or not?
Despite the energy disagreements, it wasn’t until Washington announced a $369 billion industrial subsidy scheme to support green industries under the Inflation Reduction Act that Brussels went into full-blown panic mode.
“The Inflation Reduction Act has changed everything,” one EU diplomat said. “Is Washington still our ally or not?”