BERLIN – The French president Emmanuel Macron heads to Washington DC this week to meet his US counterpart, Joe Biden. The 1 December meeting will highlight the ties between the two democracies, little more than a year after they were severely tested by the US, UK and Australia signing a tripartite deal on nuclear submarines that excluded France. (I wrote at the time how badly the deal was viewed by Paris; “a stab in the back” sums it up.) Since then, Russia invaded Ukraine, which has given a renewed importance to the transatlantic alliance between France and the US. Macron’s trip to Washington will mark Biden’s first “full-scale” state visit since entering the White House.
But behind the apparent warm ties and shared agreement on countering Russia’s aggression, there are also tensions. Macron’s office has suggested that a focus of the trip will be a growing point of contention between the EU and US: massive federal subsidies to American businesses under the $369bn Inflation Reduction Act, signed into law this August. European officials are increasingly worried that the act’s generous subsidies, combined with energy costs that are much higher in Europe than in the US, will lead to a steep drop in investment and production in Europe.
“We cannot risk more deindustrialisation in Europe at a time when we’re trying to re-industrialise,” an aide to Macron told reporters in France last week.
The Inflation Reduction Act’s subsidies to the production of green energy, electric cars and batteries provide an unfair advantage to US firms, according to Macron and other European leaders. Indeed, Margrethe Vestager, the EU commissioner for competition, told me last week that she is worried about businesses relocating investment to the US because of the “attractive subsidies… and attractive energy prices” outside of the EU. The US needs to take the EU’s “legitimate concerns over competitiveness” into account, she added. One option Macron will reportedly push is for European companies to get exemptions from some Inflation Reduction Act provisions, as have been granted to Canadian and Mexican companies.
Underlying the tensions is a belief among European leaders that the continent is not getting enough credit for the sanctions it has imposed on Russia in retaliation for the invasion of Ukraine, particularly on energy. The EU was heavily reliant on imports of Russian energy, which have been phased down since the full-scale war began in February. These sanctions have come at significant cost to the European economy, the pain of which could be exacerbated by a drop in investment in Europe.
Macron will attempt to convince Biden that it is in the US’s own interest not to weaken European companies at a time when they are facing immediate difficulties – largely due to the war in Ukraine – as well as the longer-term challenges to democratic economies posed by China’s model of state capitalism. Maintaining the united front that has so far prevailed against Russia will require agreeing on these technical but potentially consequential points.
This article first appeared in the World Review newsletter. It comes out every Monday; subscribe here.
[See also: Rishi Sunak and Keir Starmer have capitulated to the Brexit zealots]
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