Biden’s ‘America First’ Economic Policy Threatens Rift With Europe

After nearly two years of marriage since the inauguration of US President Joe Biden, serious tensions are brewing between Washington and its European allies on the economy. Unless these conflicts are managed wisely, the Biden administration’s vision of a new global economic order in which the United States works with its allies in Europe and Asia to contain the ambitions of China and Russia could degenerate into a world of competing economic groups.

After a few months of silence, the bruises started to show last week. Thierry Breton, the European Union’s internal market coordinator, announced that he will withdraw from this week’s meetings in Maryland of the US-EU Trade and Technology Council, the main body coordinating trans-Atlantic economic policies. He said the plan “doesn’t give enough space to issues that are of concern to many European industry ministers and businesses,” pointing to EU complaints about new US subsidies for electric vehicles and clean energy that hurt European carmakers and other companies. Instead, he said he would focus on “the urgent need to protect the competitiveness of European companies.”

French President Emmanuel Macron, who was in Washington last week to attend the first White House dinner held since the COVID-19 pandemic, said that US aid “is very good for the US economy, but it is not well matched. with the economy of in Europe.” Before the visit, Bruno Le Maire, France’s minister of economy and finance, criticized the United States for following the policies of Chinese companies.

After nearly two years of marriage since the inauguration of US President Joe Biden, serious tensions are brewing between Washington and its European allies on the economy. Unless these conflicts are managed wisely, the Biden administration’s vision of a new global economic order in which the United States works with its allies in Europe and Asia to contain the ambitions of China and Russia could degenerate into a world of competing economic groups.

After a few months of silence, the bruises started to show last week. Thierry Breton, the European Union’s internal market coordinator, announced that he will withdraw from this week’s meetings in Maryland of the US-EU Trade and Technology Council, the main body coordinating trans-Atlantic economic policies. He said the plan “doesn’t give enough space to issues that are of concern to many European industry ministers and businesses,” pointing to EU complaints about new US subsidies for electric vehicles and clean energy that hurt European carmakers and other companies. Instead, he said he would focus on “the urgent need to protect the competitiveness of European companies.”

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French President Emmanuel Macron, who was in Washington last week to attend the first White House dinner held since the COVID-19 pandemic, said that US aid “is very good for the US economy, but it is not well matched. with the economy of in Europe.” Before the visit, Bruno Le Maire, France’s minister of economy and finance, criticized the United States for following the policies of Chinese companies.

The aid in question is part of two major bills passed by the US Congress earlier this year: the Inflation Reduction Act (IRA) and the CHIPS and Science Act. The former provides $370 billion in subsidies to get clean energy to the United States. It includes tax credits for US buyers of electric cars—but only if the cars are assembled in North America and the parts are made in the United States or other designated “free trade partners,” language that would hurt European car companies like Volkswagen. and BMW. The final bill provides $52 billion in aid for semiconductor companies to build new plants to produce high-quality products in the United States. European leaders see both measures as unfairly subsidizing US companies, exacerbating competitive pressures, and forcing Europe into an expensive arms race with the US and China.

The Dutch government also publicly pushed back last week against US pressure on major chip makers, ASML and ASM International, to cut ties with China. The United States has launched a major campaign to block sales of advanced semiconductors and chip-making equipment to China but has not forced allies such as Japan and the Netherlands to join. Dutch Finance Minister Micky Adriaansens said this Financial Times that his country is “very good” in relations with China and that Europe and the Netherlands “need to have their own strategies” in controlling exports to China.

The growing division is the result of Russia’s war on Ukraine. Although the United States and Europe have yet to agree on sanctions against Russia and military aid to Ukraine, Europe has paid a high economic price for the war. Natural gas prices in many European countries have risen up to 10 times those in the US, putting European companies at a serious competitive disadvantage. Although the United States has helped Europe fill the loss of Russian gas by exporting natural gas (LNG), it is being sold at inflated prices in the market. The French ambassador in Washington, Phillipe Étienne, said Foreign Policy: “We are happy that the United States supplies Europe with LNG, but there are problems with the price.”

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For a long time, the debate centered on the conflicting policy goals of the Biden industry. On the one hand, the United States wants to create strong supply chains that reduce China’s role in providing the necessary technologies and raw materials for future industries. This requires close cooperation with partners – what officials say is “friendship” – to avoid duplication and ensure the smooth running of the situation. On the other hand, management is eager to see a revival of US manufacturing, believing that the loss of manufacturing – due to competition from China – will weaken US security and damage the economy. The loss of electoral jobs also eroded voter support for Democrats in industrial transition states such as Michigan, Pennsylvania, and Wisconsin. Each of the new US products puts a thumbs up in favor of companies selling in the United States and not in Europe or their closest friends.

Biden’s Secretary of Commerce, Gina Raimondo, whose father was laid off for 28 years at the Bulova watch factory in Rhode Island when the company moved to China, made it clear in a speech at MIT last week: “Going forward, we’re not just going to make the technologies of the future in America. , but we will make it here.” Not surprisingly, this does not go well with US allies and other trade unions, who are faced with the prospect of losing markets to China as the United States insists on accepting new sanctions, only to see multinational companies move or expand production in the United States to use cheap energy and free help.

It is not only Europeans who are worried. The head of the World Trade Organization, Ngozi Okonjo-Iweala, is trying to defend the principle of non-discrimination – the need for equal treatment of trading partners – which has been at the heart of most trade for 75 years. She says that few countries accept the decisions of the Biden administration. “Many countries do not want to choose between two groups,” he said in a speech at the Lowy Institute in Australia. Forcing such a choice would undermine progress on issues on which the United States, China, and other countries have no choice but to work together. He warned that “policy-based coalitions designed for stability and security can become your target,” destroying the alliance in the face of challenges such as climate change, pandemics, or credit stress.

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Biden’s remarks before the state dinner with Macron show that he is well aware of European concerns and is ready to work to meet them. He added that the two leaders “agreed to discuss practical ways to coordinate and coordinate our strategies” and ensure that creativity and innovation are encouraged “on both sides of the Atlantic.” Macron also said that the two sides agreed to “reconcile our strategies.” “We can overcome the disparity that exists,” Biden said. “I am sure.”

Most of them will not be easy to solve, however. Biden openly acknowledged that there are “challenges” in the proposed legislation. But it is not clear, for example, whether the language of the IRA on the expansion of subsidies for goods produced by free enterprises can be included in the EU. And there are many in Congress and administration, as well as in industries such as steel and solar, who are committed to the policy of “America first”, believing that the United States is too late to revive manufacturing. They will push back against a liberal interpretation of the law.

Biden and the European leaders know very well that they cannot allow the trans-Atlantic river to open. More than at any time since the beginning of the Cold War, the dual threat of Russia and China is forcing the United States and Europe to come together and end economic conflicts that would have been festering for years in less difficult times – like the long term. dispute over subsidies to Airbus and Boeing.

A high rise indicates that the two sides will find a way through. As Macron said: “Circumstances mean we have no choice but to work together.”

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