France and Germany set to push back against US green tech poaching

France and Germany’s economy ministers will ask the US to lay off making “aggressive” overtures to European companies in a bid to lure their green investments across the Atlantic, French officials said ahead of a visit to Washington this week.

France’s Bruno Le Maire and Germany’s Robert Habeck are due to hold talks with White House officials on Tuesday to underscore EU concerns about President Joe Biden’s landmark climate legislation, the Inflation Reduction Act, and push for better co-operation.

The $370bn US package, which contains hundreds of billions of dollars in subsidies for green tech, aims to bolster investment in everything from electric carmakers to renewable energy producers. The bill, originally intended to challenge China’s dominance of green tech, is conditioned on manufacturing being local, which has sparked fears that a growing number of businesses considering investments in Europe would pivot to the US instead.

Le Maire and Habeck will ask the US not to go above and beyond that framework by actively trying to poach EU businesses, the French officials said. Representatives of economic bodies from several US states including Michigan and Ohio toured Europe in recent months to tout the incentives.

“What we’re looking for are not only exemptions, but also to have a mutual understanding to avoid a subsidies race and also to avoid aggressive tactics involving the US administration going to see European companies to ask them if they want to move their factories to the US,” one of the French officials said. “You don’t do that among friends.”

There was “enough room for everyone”, the second official added.

During their joint trip to Washington, Habeck and Le Maire will meet US Treasury secretary Janet Yellen, trade representative Katherine Tai and commerce secretary Gina Raimondo.

The EU has repeatedly pressed for exemptions to the US climate package to help some European businesses benefit from the subsidies without uprooting their production. Lower energy costs in the US, which is less directly exposed to the impact of Russia’s invasion of Ukraine on global markets for oil and gas, are also making that market more attractive for some manufacturers.

The Le Maire and Habeck visit, billed in part as a show of unity between France and Germany at a time when relations have been strained by the energy crisis in Europe and the fallout from the Ukraine war, is unlikely to yield much in terms of extra wriggle-room, the officials said.

The main exemption obtained so far allows electric cars built outside North America to qualify for some of the tax credits offered to US drivers, a shift that could benefit German auto manufacturers in particular.

German officials have expressed concern that some in the US Congress want to revisit the compromise on electric cars. “There have been efforts made by some to reopen it and we want to signal how important it is for us that this agreement is preserved,” said one.

Habeck and Le Maire also hope to persuade the US to show more flexibility when it comes to local production requirements contained in the IRA for critical materials used in electric car batteries, German and French officials said — one area where there are already co-operation treaties between the EU and the US. They will also press for transparency on the level of US subsidies handed out to businesses, which could allow the EU to match some of the incentives.

The European Commission is generally in charge of trade policy for the bloc. However, a German official noted that it was “very important that [France and Germany] explain [to the US] from a national perspective what kind of effect the IRA could have on us, and the challenge that it presents”, he said.

The EU is preparing its own response to the US climate programme, which includes loosening restrictions on subsidies in Europe and extra funding for green tech businesses.