Washington’s Inflation Reduction Act could disadvantage European firms, Germany says
Photo taken on Aug 16, 2022 shows the White House in Washington, DC, the United States. (PHOTO / XINHUA)
Washington’s new Inflation Reduction Act legislation marks a violation of the World Trade Organization’s rules, according to German Economy Minister Robert Habeck.
The European Union is seeking to resolve the row with the US in the coming weeks, Habeck said at a conference organized by the Sueddeutsche Zeitung newspaper in Berlin, Reuters reported.
US President Joe Biden signed the sweeping $750 billion healthcare, tax and climate bill into law on Aug 16, drawing complaints from other countries in Europe and Asia, including the Republic of Korea.
Europe has been working to resolve the trade dispute with US since then, as Habeck said the act could disadvantage European firms and draw investments out of the European continent.
From a European point of view, the Act is a violation of the World Trade Organization’s rules that cannot be accepted in the long term, the minister said.
“What does this mean for Europe? We must act more quickly, decisively and resolutely. It’s not a question of money at all ... but we are too slow in spending it,” he was quoted as saying by Reuters.
Habeck has won the support of visiting guests, including French government officials, on this matter.
At the event he also talked about trade with China. “Nothing speaks against continuing to maintain economic relations with China,” he said. “It is completely impossible for the German economy, to now quickly say goodbye to it, but everything speaks against closing your eyes and hoping the situation doesn’t get difficult.”
Earlier this year, Germany earmarked 200 billion euros ($207 billion) to fund industrial change between now and 2026, including climate protection, hydrogen technology and expansion of the electric vehicle charging network.
Many German companies active in the manufacturing sector have been cutting back on their use of natural gas with only minor restrictions on production, the Ifo Institute for Economic Research said on Nov 22, citing a recent survey. However, “this will become more difficult in the future,” it said.
On Nov 22, the European Commission announced its long-awaited proposal on steps to limit excessive gas price spikes that have caused concerns among member states.
The “market correction mechanism”, as the new steps are called, aims to reduce volatility of European gas markets while safeguarding gas supply security, the commission said.
Natural gas prices have hit record highs across the European Union following the outbreak of the Russia-Ukraine conflict, reaching an all-time high of over 342 euros per megawatt-hour in August. However, prices have fallen considerably in recent weeks, to around 116 euros.
“This is not a regulatory intervention to set the price on the gas market at an artificially low level,” European Commissioner for Energy Kadri Simson said on Nov 22. “It is a mechanism of last resort to prevent and, if necessary, address episodes of excessively high prices, which are not in line with global price trends.”
If approved by all EU member states, the mechanism will be in place for a year starting Jan 1. It will be triggered only when two criteria are met: If month-ahead prices on the Dutch TTF exceed 275 euros for two weeks, and if the difference between the TTF price and the global liquefied natural gas price is 58 euros or more. TTF, or Title Transfer Facility, is a virtual trading point for natural gas in the Netherlands.
