EU demands similar access to US as Canada and Mexico for electric cars and renewable products

European electric cars, batteries and renewable energy products should have the same access to the US market as those from Canada and Mexico, EU officials said on Monday, as the bloc prepares to start negotiations with Washington over its Inflation Reduction Act.

The US signed its $430 billion anti-inflation bill into law in August. It includes state aid to boost US manufacturing and incentives for consumers to buy American products including cars and renewable energies.

The EU believes that the bill risks unfairly discriminating against its own products and a joint EU-US Task Force to resolve the issue has been set up. The first meeting is scheduled for later this week.

“The result we’re expecting is a derogation for EU member states,” Czech trade minister Jozef Síkela told reporters in Prague on Monday following a meeting of EU trade ministers.

“Of course, ideally we would like to have the same level of derogation as there is for Canada and Mexico but we need to be realistic. This is our starting point in the negotiations,” he explained.

Valdis Dombrovskis, the EU Commissioner for Trade, added that “it would appear that many of the green subsidies provided for in the Act may discriminate against EU automotive, renewables, battery and energy-intensive industries.”

 “Hopefully we are going to have constructive engagement from the US and we look forward to seeing this issue resolved in this new forum. It probably won’t be easy to fix it but fix it we must”.

Asked specifically about whether the EU would consider retaliating if talks break down, Dombrovskis said that “at this stage, we are focusing on negotiated solutions before considering what other options there may be.”

He also said that he had discussions with other countries that have “similar concerns”, including Japan and South Korea, and that they too are “looking (at) how to best approach this issue.”

“But currently, we will give negotiations a chance before engaging in further considerations,” he reiterated.

French President Emmanuel Macron has for instance championed a “Buy European Act like the Americans” to protect European manufacturers.

“You have China that is protecting its industry, the US that is protecting its industry and Europe that is an open house,” he told French television earlier this month. 

European manufacturers are being hit hard by energy prices, which have soared in recent months as a result of Russia’s illegal war against Ukraine and Moscow’s decision to stop delivering gas to the bloc in retaliation for wide-ranging sanctions. 

Inflation in the euro area is for instance expected to have jumped 10.7% year-on-year in October — the highest level ever recorded in the 19-country zone. 

It is been fuelled by energy prices which have increased by more than 41% since October 2021.