The European Union still believes President Joe Biden’s Inflation Reduction Act discriminates against corporations within the bloc, its top trade minister said Thursday.
Nevertheless, Valdis Dombrovskis told CNBC that the EU was engaged in ongoing negotiations with U.S. officials that had allayed just some of its concerns thus far.
“Our concerns are the discriminatory measures in [the] U.S. Inflation Reduction Act, which is discriminating against EU corporations,” he said in an interview on the World Economic Forum in Davos, Switzerland.
“We expect we must always be addressing the climate change and green transition jointly, constructing transatlantic value chains, not breaking them apart.”
The IRA was approved by lawmakers in August and includes a record $369 billion in spending on climate and energy policies. It was met with swift criticism from EU member states, who feel that a bunch of its provisions — including green subsidies corresponding to tax credits for electric cars made in North America — threaten European industry.
Asked by CNBC’s Geoff Cutmore if there was any risk of the dispute escalating right into a trade war, Dombrovskis said: “Currently we’re specializing in negotiated solutions, we’re reaching out to U.S. authorities at different levels.”
“We’ve a dedicated EU-U.S. task force which continues its work. We’ve made some progress, a few of our concerns are being addressed, but there are still concerns which have to be addressed.”
On what the EU’s response can be if it was not satisfied with the consequence of negotiations, Dombrovskis said now was “not about sabre ratting.”
He added the bloc was working on its broader economic policy response to competitiveness issues given the challenges of high energy prices and the war in Ukraine, in addition to the IRA.
That is ready to incorporate a review of existing EU subsidies and funds and whether or not they are getting used most effectively.
Dombrovskis also said they were trying to adjust the EU’s strict state aid rules to permit member states to offer more support for corporations aiding the green transition, as previously called for by European Commission President Ursula von der Leyen.
“But there after all we have to be rigorously framing it to keep up a level playing field inside the EU single market,” Dombrovskis said.
Ireland’s Finance Minister Michael McGrath told CNBC Wednesday the EU desired to avoid a “subsidies race” with the U.S., and that any changes to state aid rules must not profit countries with the “means and resources” to offer greater support to corporations than others.
Meanwhile, Spanish Prime Minister Pedro Sanchez said Monday the EU could learn lessons from the IRA.
“We want to reform some internal points of our industrial policies corresponding to state aid, reducing bureaucracy and attempting to send a message for the industry worldwide that is it’s Europe, and after all Spain, that’s place to locate,” he added.
—CNBC’s Silvia Amaro contributed to this text.