By Michel Rose
WASHINGTON (Reuters) β French President Emmanuel Macronβs discussions with U.S. President Joe Biden have resulted in a βmajor breakthroughβ to avert a βsubsidies raceβ between the two sides of the Atlantic, Franceβs finance minister said on Friday.
Macron took advantage of his state visit in Washington this week to press the United States to find ways to soften the impact of the U.S. Inflation Reduction Act (IRA), a massive subsidies package which Europeans fear could derail their own industrial recovery.
βI really think the state visit of the French president in Washington is a turning point,β French Finance Minister Bruno Le Maire told Reuters and the Financial Times in a joint interview.
βI think thereβs now a real awareness (of the issue), recognition by the U.S. administration, but also by Congress,β he said in Washington.
Biden said in a joint news conference with Macron on Thursday that βtweaksβ could be applied to the way the legislative components of the IRA are implemented to prevent European countries from being hurt by its consequences.
βFor example, thereβs a provision in it that says that there is the exception for anyone who has a free trade agreement with us,β Biden said on Thursday. βThat was added by a member of the United States Congress who acknowledges that he just meant allies; he didnβt mean, literally, free trade agreement. So, thereβs a lot we can work out.β
In the interview with Reuters, Le Maire said the fact Biden suggested allies could be treated like countries with a trade deal, such as Canada and Mexico, was a βmajor breakthroughβ that came from intense discussions between French and U.S. officials.
βItβs a major breakthrough to say: theyβre our allies, theyβre our friends. So even if we donβt have a trade deal with Europe, weβre going to consider European components the same way as those from countries with a trade deal,β Le Maire said.
βItβs not an adjustment, itβs an important political choice.β
French officials say technical work will continue in the coming days and weeks to see how to translate that into regulation, but they believed executive orders by the Biden administration could be the conduit for the βtweaksβ.
In Washington, Macron, Le Maire and other French officials went on a lobbying offensive targeting U.S. officials from all branches of power, from the White House to Capitol Hill, with Macron warning U.S. lawmakers from both sides of the aisle in a meeting behind close doors that the IRA was seen as βsuper aggressiveβ by European companies.
Asked whether Macron had brandished the threat of an appeal to the World Trade Organisation, Le Maire said he did not have to, and that the United States under Biden was very keen to work with European allies, especially as China was a common rival.
βNobody wants a trade war in the situation weβre in,β Le Maire said. βWe have one competitor called China. The strategic goal of the United States, it seems to me, is not to weaken Europe but, on the contrary, to work in partnership with Europe.β
Le Maire said he had also been working in coordination with his German counterpart, Economy Minister Robert Habeck.
German carmakers are among the biggest potential victims of the IRA, which provides big subsidies to U.S.-made electric cars. French car parts companies such as Valeo, which supply German carmakers, would also have suffered.
Le Maire said that although the impact of the U.S. package could now be mitigated, the episode showed Europe was too slow to encourage investment in the technologies of the future, with instruments that could take two years to provide subsidies to industry, when U.S. tax credits were instant.
βItβs up to us, Europeans, to put our own house in order,β he said.
(Reporting by Michel Rose; Editing by Daniel Wallis)