France plays bad cop as transatlantic trade tensions ramp up – POLITICO

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PARIS – US President Joe Biden must be careful; France is resuming its traditional role as Europe’s troublemaker on the transatlantic trade front.

It seemed as if the bad blood between Brussels and Washington was easing under Biden’s watch. Faced with a common enemy in China, the EU and US last year struck a truce over tariffs imposed on European steel and aluminum by former President Donald Trump. This year, Russia’s war against Ukraine has meant that America and Europe have had to be united, at least politically.

However, cracks are appearing again. The EU is furious that the US is subsidizing the domestic electric car industry. Europe accuses Washington of protectionism and is now threatening to build its own defenses.

Not surprisingly, French President Emmanuel Macron is leading the charge. “Americans are buying Americans and are pursuing a very aggressive government aid strategy. The Chinese are closing their market. We cannot be the only area that is the most virtuous in terms of climate, that thinks there is no European preference,” Macron told French daily Les Echos.

He upped the ante, urging Brussels to support consumers and businesses buying electric cars produced in the EU, rather than those from outside the bloc.

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Europeans fret about their trade balance for good reason.

The war has caused a massive terms-of-trade shock, with skyrocketing energy costs driving the EU into a yawning bloc-wide trade deficit of 65 billion in August. In a manifestation of these tensions, Europe’s growing reliance on American liquefied natural gas to replace lost Russian supplies rekindled tensions.

Macron’s comments reflect the EU’s dismay at Washington’s Inflation Reduction Act, which incentivizes US consumers to “buy American” when shopping. a greener car. The EU argues that requiring the car to be assembled in North America and contain a battery with a certain percentage of local content discriminates against the EU and other trading partners.

The European Commission hopes to persuade Washington to find a diplomatic compromise for European automakers and their suppliers. If not, the EU has no choice but to challenge Washington at the World Trade Organization, EU officials and diplomats told POLITICO — even if a new transatlantic trade war is the last thing either side wants to spend their time and money on.

Macron’s comments “are clearly a reaction against the anti-inflation law,” noted Elvire Fabry, a trade policy expert at the Jacques Delors Institute in Paris. “Macron is playing the role of bad cop compared to the European Commission, which gave Washington some policy space to adjust,” she noted.

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“American Supremacy”

The EU Commission hopes to find a diplomatic compromise with the US for European automakers and their suppliers after anti-inflation law encourages US consumers to buy ‘American’ green cars | Ludovic Marin/AFP via Getty Images

France has traditionally been the bloc’s most outspoken country when it came to confronting Washington on a variety of trade deals. For example, Paris played a key role in the failure of a transatlantic trade deal between the EU and the US (the so-called “TTIP”). His digital tax angered US Big Tech and sparked a trade war with the Trump administration.

More recently, during its rotating presidency, Paris has focused on trade safeguards that will give Brussels the power to resist unilateral trade measures, including by the US

New tensions are bad news for the upcoming Trade and Tech Council meeting in early December, which has so far struggled to show it’s anything more than glorified shoptalk.

France will not be left alone in a possible trade war over electric cars. According to Fabry, these tensions will bring Paris and Berlin closer together, as the German auto industry is also particularly affected by the US measures.

But the “Buy American” approach isn’t the only bone of contention. The fact that Europe is increasingly relying on gas imports from the US took European discontent to the next level.

Although gas import prices fell in September from their all-time highs in August, they were still more than 2.5 times higher than a year ago. And factoring in the increased volume of purchases, France’s bill for LNG imports has increased more than tenfold year-on-year in August, by one estimate.

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Economy and Finance Minister Bruno Le Maire warned last week that Russia’s war against Ukraine must not lead to “American economic dominance and a weakening of Europe”. Le Maire criticized the US for selling LNG to Europe “at four times the price they sell it to their own companies” and urged Brussels to take action for a “more balanced economic relationship” between the two continents.

The same concern is shared by some Commission officials, POLITICO has learned, but also by French industrialists.

It is “hard to dispute” that the US has reaped some economic benefits from the war in Ukraine and suffered less from its economic fallout than Europe, said Bernard Spitz, head of international and European affairs at France’s business lobby Medef.

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