MEPs seek answers on how the EU is handling the massive tax breaks to companies producing in the US, a scheme that puts European companies at a disadvantage. The roughly €350 billion Inflation Reduction Act aims to build a new green economy by giving subsidies and tax credits to companies which manufacture with local parts or produce in the US from 1 January 2023, to the detriment of European manufacturers and in potential breach of World Trade Organisation (WTO) rules. Opening statements by Mikuláš BEK, Czech Minister for European Affairs and Margrethe VESTAGER, Vice-President of the European Commission.

statement

Strasbourg

debate

plenary session

EU - USA (T)

VESTAGER, Margrethe (DK)

BEK, Mikuláš (CZ)

EU response to the US Inflation Reduction Act: opening statements by Mikuláš BEK, Czech Minister for European Affairs and Margrethe VESTAGER, Vice-President of the European Commission

SOUNDBITE (English), Mikul&aacute;&scaron; BEK, Czech Minister for European Affairs, President, Honourable Members, Vice-President of the Commission. The topic of possible repercussions of the US Inflation Reduction Act on the EU has been high on our political agendas in recent weeks and months. There are concerns in the Council that the discriminatory elements of the IRA, which are designed to benefit US based manufacturers without guaranteeing a level playing field, may have a negative impact on European companies.

SOUNDBITE (English), Mikuláš BEK, Czech Minister for European Affairs, The new US legislation, even if not in place yet, is already having an impact on the investment plans of our companies, and there is a clear potential for a more systemic impact on the EU industry, in particular in sectors which are of crucial importance for our green transition. We are encouraged by recent positive statements of President Biden himself and the ongoing talks with the US administration.

SOUNDBITE (English), Mikuláš BEK, Czech Minister for European Affairs, We will support any credible solutions that emerge out of these talks. But there is not much time left before the IRA enters into force. Well, the cooperation with our US partners in addressing the most concerning aspects of the IRA will remain important. We will also need to consider in parallel what we can do at the European level to support the competitiveness and resilience of our companies.

SOUNDBITE (English), Mikuláš BEK, Czech Minister for European Affairs, The attractiveness of the EU an investment location, and to reinforce our ability to step up our green transition in this crucial moment. We will collectively need to consider the appropriate measures, for instance, regarding efficiency of state aid and industrial policy to decisively address the distortions created by the IRA or any other future measures that put our companies and the European economy at a competitive disadvantage.

SOUNDBITE (English), Mikuláš BEK, Czech Minister for European Affairs, The US programme comes at a moment where high energy prices are already having a considerable negative impact on our industries and our competitiveness. The EU should be proactive and double the efforts already underway to extend trade opportunities for our companies and improve access to raw materials, in particular those which are of essential importance for the green transition.

SOUNDBITE (English), Mikuláš BEK, Czech Minister for European Affairs, Europe has been very active on this front, with key agreements underway or just concluded, like the very recent modernisation of the free agreement with Chile, thus showing Europe's continued engagement with partners on this positive agenda. Europe needs to act swiftly and the upcoming European Council will bring a timely opportunity to hold a dedicated debate on our transatlantic relations.

SOUNDBITE (English), Mikuláš BEK, Czech Minister for European Affairs, Finally, let me underline that while we are continuing engaging with the US on the IRA, our strategic partnership remains stronger than ever as the ongoing Russia's war of aggression against Ukraine shows the crucial importance of the transatlantic bond for our as well as global security. Thank you very much for your attention.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, Honourable members, thank you for this opportunity to present the Commission's engagement with US on the Inflation Reduction Act. The competitiveness of European industry faces a double challenge.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, First, Russia's war and the weaponization of energy supply has led to an extraordinary increase in energy prices in Europe, as we just discussed, this is also heartfelt in a number of households, many, and also because of that, the dramatic increase, the price differences between Europe and the US in particular.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, Second, the US Inflation Reduction Act provides generous incentives for investing in the US, including in some ways that are discriminatory against European companies and other companies as well.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, The EU has encouraged the US for a very long time to increase its climate action to do more. The Inflation Reduction Act is an important initiative to deliver on this and the Commission is fully supportive of the climate goals that the US is trying to achieve with the Inflation Reduction Act.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, So far for the good news, because the Inflation Reduction Act discriminates against EU producers and exports. Many of the green subsidies, they come with local content assembly manufacturing requirements. The effect will be felt not only by EU manufacturers of key final products to enable the green transition, but also their suppliers of upstream components within the European Union, including highly specialised small and medium sized businesses.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, The Inflation Reduction Act is therefore a very strong pull factor to move investment and jobs to the US at the cost of partners and allies like the EU. This is counter-productive in terms of climate and sustainability outcomes. It is also a violation of international trade rules, but in a wider sense it goes against the spirit of our transit Atlantic partnership. And we have made this clear with the Biden administration.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, Executive Vice President Dombrowski and I discussed this in clear terms during the Trade and Technology Council meeting with our counterparts, Secretary Blinken, Secretary Raimondo, and Trade Representative Tai. It is fair to say that the Inflation Reduction Act was prominence in our discussions in Maryland last week.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, And as a result, we heard a clear statement from Secretary Blinken committing to address EU concerns, building on the comments by President Biden giving a few days later. But they also contented that any legislative changes would be difficult. So what we need to see now is that these political commitments made by the US that they translate into concrete solutions in the implementation of, the act to limit the damage as much as possible.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, This is the aim of the task force, which has been set up between the European Commission and the White House. It will continue working hard with the aim of seeing results by the end of this year because that is also the timing for guidance of the US Treasury to implement the Inflation Reduction Act.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, We already have war in Europe. The last thing we need is a trade war on top through the trade and technology Council and in particular, when you look at the work that we've been doing on semiconductors, well, we have shown that a collaborative transatlantic approach to industrial subsidies that is possible.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, And this should be the guiding principles for these sectors, the green sectors, the clean tech sectors that we are discussing as well. While we keep working with our U.S partners to avoid negative consequences for Europe of the US Inflation Reduction Act, we need to continue pushing for Europe to become a decarbonised, low energy price continent and for that to happen as soon as possible.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, The attainment of the Green Deal's objective for Europe to become a climate neutral continent by 2050, that should not be put at risk. The Green Deal is the European growth strategy, and we need to accompany our industries in meeting the ambitious targets is therefore of fundamental importance that the European Union stays an attractive place for innovation, for investment in sectors that are strategic to the green transition.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, Those are not all sectors, those are specific sectors. To facilitate this, just to face the energy crisis, as you will know, March this year, we put in place a temporary crisis framework. This enables member States to help businesses that face extraordinary increases in energy prices. And we have been it constantly to ensure that it remains adapted to the needs of the business community.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, But in the current context, in the combination of huge state differences, the effects of the Inflation Reduction Act, we need to make sure that it is even simpler, even faster, even more, target it while not losing sight of the need to preserve a level playing field to keep the single market together. And in this context, yesterday we launched a consultation of Member States in particular to seek their views on the following three issues.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, First, how to further simplify the granting of aid for the rollout of renewable energy. Second, how to further simplify the granting of aid to decarbonise production processes of industry. And thirdly, whether it is necessary to support certain types of productive investment in strategic sectors for the Green transition.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, If supported by the result of the consultation of Member States, targeted adaptions of our temporary framework could serve as a bridge to real European solutions in the medium term. The whole of the EU and not only the richest regions and Member States should be able to preserve a strong industrial base. And that is why we need a European fund to complement existing instruments and to help ensure a fair green transition in all of Europe.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, Finally, public supports cannot do it all. Europe urgently needs to become a decarbonised, low energy price continent. State aid can be a short term solution to the current challenges. But to be competitive on the world stage, we must make further efforts to remove single market barriers, barriers that unfortunately still exist.

SOUNDBITE (English), Margrethe VESTAGER, Executive Vice-President of the EC in charge of Europe fit for the Digital Age, With the Repower EU plan we have together, given new impetus to the rollout of renewables. But more work is ahead of us to make the decarbonisation of our energy system happen fast and to bring the benefits of the high share of renewables in the energy mix to consumers in a lasting a way. Thank you very much.