The promotion should only apply to US cars.
(Photo: REUTERS)
Brussels The EU Commission is preparing to take legal action against the subsidies for American electric cars. On Sunday, the US Senate passed legislation to reduce inflation, including incentives to buy cars. The House of Representatives is expected to approve it this Friday. This is considered a formality. Accordingly, electric cars are to be promoted with a tax credit of up to 7,500 US dollars.
However, the planned subsidies could contradict the rules of the World Trade Organization (WTO). The reason for this is that US cars would be preferred to other cars.
At least that’s how the EU Commission sees it. “The European Union is deeply concerned about this new potential transatlantic trade barrier that the US is currently discussing,” a spokeswoman said on Thursday. “We must ensure that the measures put in place are fair and non-discriminatory. We call on the United States to remove the discriminatory elements from the bill and ensure it is fully WTO compliant.”
The planned subsidy rules stipulate that the final assembly of the car must take place in the USA or in a country with which the USA has a free trade agreement. These are primarily Canada, Australia, South Korea and Latin American countries.
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In addition, 40 percent of the metals used in the vehicle battery are said to come from North America. By 2027, this proportion is set to rise to 80 percent. If these values are not met, the buyer is only entitled to half of the tax credit, i.e. $3750.
The law is also met with criticism in the USA
Another regulation requires that half the value of the batteries must be manufactured or assembled in the United States. If this is not the case, the rest of the tax credit would also be lost. These requirements are also becoming stricter every year and will reach 100 percent in 2029. The US government’s goal is not only to reduce CO2 emissions in the country, but also to bring the supply chains for electric cars into the country.
The EU also wants to promote battery production, but does so in a different way than the USA.
(Photo: dpa)
The Commission spokeswoman said: “The current design of the tax credit for electric vehicles is clearly discriminatory.” Certain resource-rich countries, North American battery production and vehicle assembly are preferred, which means a disadvantage for EU producers. There is also a risk that the subsidies will undermine the common climate goals of the EU and the USA.
>> Read here: 369 billion dollars – The US climate protection package disappoints the Europeans
In the USA, the law is met with criticism for another reason: according to the media, hardly any manufacturer can meet the requirements, which is why the promotion will only benefit very few buyers.
The EU also wants to promote battery production, but does so in a different way: as part of an “Important Project of Common European Interest” (Ipcei), seven EU countries are subsidizing companies in the battery sector. However, the development of production capacity is not funded, only research, development and innovation.
More: What the multi-billion dollar US climate package means for the economy