French President Emmanuel Macron has arrived in Washington to discuss the unfolding trade row between the US and the EU over Joe Biden's protectionist Inflation Reduction Act (IRA). It's Macron's first visit to the US after the submarine deal debacle that sidelined Paris and cost the French a lucrative defense contract.

Macron's official visit to Washington will last from November 30 to December 2 with the French press insisting that the time has come to turn the page on the 2021 Franco-Australian submarine affair. 

BY EKATERINA BLINOVA

Last year, Australia unilaterally cancelled its contract to purchase French submarines and concluded a new deal with the US and UK under the trilateral AUKUS treaty. At that time, Macron went so far as to recall his ambassador to Washington for consultations.

Even though the French president's visit is seen as a good opportunity to mend fences between Washington and Paris, there is yet more trouble brewing for European-American relations. Joe Biden's $369 billion climate bill, also known as the Inflation Reduction Act (IRA), has prompted a storm of criticism in the Old Continent, being seen as a controversial protectionist measure. 

Indeed, the IRA offers tax credits for electric cars made in North America and prioritizes US battery supply chains. On top of that, the policy envisages investing billions in new US electric vehicle incentives.

The EU is reportedly concerned about nine of the US tax credit provisions which could create new trade barriers for European electric vehicle (EV) manufacturers. At the same time, Europeans fear that the US' protectionist measures create an unfair advantage for US producers. 

Furthermore, the act could encourage EU companies to relocate to the US and shatter the world's established trade rules, according to Brussels. European policymakers are also concerned about the potential impact of US export measures aimed at curtailing China's access to semiconductor technologies on EU firms.

Meanwhile, European observers suggest that Washington could offer the EU the same preferential terms on electric vehicles enjoyed by Canada and Mexico. Thus, Biden's legislation extends the $7,500 EV subsidy provisions to automobiles assembled in these two North American countries. The list of countries in which "applicable critical materials" such as aluminum, graphite, lithium, manganese, etc. may be extracted, processed or recycled include Canada and Mexico.

According to legal experts, the aforementioned IRA provisions could trigger a WTO dispute as they potentially violate the organization's General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade and Investment Measures (TRIMs). Given that, the Biden administration should come up with rules reducing the IRA's discriminatory effects and soften the effect of semiconductor export controls, argue European observers.

Macron is among those subjecting Biden's climate bill to harsh criticism. Moreover, the French president previously called for implementing similar measures to support European producers. 

"We need a Buy European Act like the Americans," the French president said last month. "You have China protecting its industry, the United States protecting its industry, and Europe is an open house." According to the European mainstream media, Brussels is now working on an emergency scheme to pour money into the bloc's major high-tech industries.

However, Washington's IRA is not the only bone of contention between the US and EU. France and Germany have repeatedly accused the US of using the Ukraine conflict and anti-Russia energy embargo to "overcharge" them for liquefied natural gas (LNG). The European bloc followed in Washington and London's footsteps by steadily decreasing purchases of Russian hydrocarbons with the aim to completely abandon them in the foreseeable future. 

To partially substitute Russian natural gas supplies, the EU is increasingly buying the US' LNG for top dollar. According to some estimates, US LNG now accounts for 45% of Europe's LNG imports, compared to 28% in 2021. Needless to say, the liquefied fuel is more expensive to import than Russian pipeline natural gas. 

Still, after Russia's Nord Stream pipelines were mysteriously blown up on September 26, 2022, the Old Continent has been left with little if any alternatives. Remarkably, the Nord Stream sabotage was described by US Secretary of State Antony Blinken as a "tremendous opportunity" to remove Europe's dependency on Russian energy. In the wake of the sabotage, some US observers admitted that Europeans are inclined to think that Washington had a hand in the attack.

In October, Germany accused the US of offering "astronomical prices" for their supplies and suggested that Washington was profiting from the Ukraine conflict. “Some countries, including friendly ones, sometimes achieve astronomical prices [for their gas]. Of course, that brings with it problems that we have to talk about,” Economy Minister Robert Habeck told the German press.

Paris echoed Berlin and urged the US to reconsider its approach: "We expect more from the US administration to get LNG at a cheaper price with a long-term approach," stated Bruno Le Maire, France's economy minister, at the IMF's annual talks in Washington last month.

However, US politicians responded that the price setting for European gas buyers is determined by the energy market and is not the result of any US government policy or action.

It appears that Washington's response did not satisfy its European allies. Thus, Macron stepped up criticism of the US' policies in late October. "The North American economy is making choices for the sake of attractiveness, which I respect, but they create a double standard," Macron said at a news conference in Brussels on October 21.

Still, the US-EU trade spat does not end here. Europeans have also been irritated by huge profits made by the US defense sector, according to the European mainstream press. The EU has already supplied around €8 billion of military equipment to Ukraine and substantially depleted its weapon stockpiles. It means that now Washington's NATO allies in Europe would have to acquire new ammo and arms which offers a new bonanza for defense contractors across the pond.

The European bloc has already vowed to spend some $230 billion on its arsenals, with Germany alone planning to fork out $100 billion this year. According to the Stockholm International Peace Research Institute (SIPRI), over half of recent military expenditures in many EU member states go to US weapons producers. For example, Norway has spent 83% of its defense budget on US-made weapons in the period from 2017 to 2021, the UK 77%, Italy 72% and the Netherlands a whopping 95%.

The EU mainstream media has already admitted that Macron is unlikely to settle these disputes during his visit to Washington. All they are hoping for is that the French president's trip could contribute to greater understanding on both sides of what is at stake. Still, there are no guarantees that this understanding will translate into a change of heart from Washington.

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