Thread by @GeorginaEWright

My latest piece for @i_montaigne explores the *real* reasons why the EU is worried about the #InflationReductionAct. Spoiler: Biden’s IRA exemptions won’t be sufficient to protect EU industry: institutmontaigne.org/en/analysis/re… THREAD (1/8)

1. EU doesn’t hate the IRA: IRA is 1st major attempt by a US administration to combat climate change. A good thing for US and the planet. Some EU companies have even benefitted from IRA (German heavy industry recorded 40% increase in Sept. 2022, compared to Sept. 2021).

2. IRA subsidies & tax breaks are the problem: Why?
1⃣EU green tech tempted to relocate production to US to benefit from generous subsidies & low energy prices;
2⃣confirms US industrial policy will continue to favour industry "Made in America".

3. EU countries know they must respond - but disagree on measures to take. Several options on the table: new fund; EU subsidies; national subsidies; Buy European Act; simplifying EU state aid and competition rules. All carry risks & none are mutually exclusive (I know, confusing)

4. Option 1, a new EU Sovereignty Fund: proposed by @vonderleyen and now the work of @ThierryBreton. A total of €350 billion, i.e. 2% of the EU’s GDP. The problem is, EU can’t agree where the money should come from - or how quickly it shd come.

5. Option 2, EU-wide subsidies: some countries open to a new mass investment plan, like the NextGenerationEU, but for EU green tech industry. All sorts of risks & pbs with this, not least: *who* allocates funding? *which* industries need it most? And more common EU debt. Tricky.

5. Option 3, national subsidies: EU wd provisionally suspend EU state aid rules to support critical industries. Wd need careful coordination to avoid intra-EU subsidy race. Also tricky.

6. Option 4, a Buy European Act: A 🇫🇷 proposal (that still needs clarifying..). From what I understand, this wd grant European preference in call for tenders. Privately, many EU officials in Brussels & across EU don't like it. Find it too protectionist. Needs refining.

7. Option 5, simpler EU rules: it's not simply abt making EU assistance available, it's also abt how quickly that assistance reaches EU businesses. EU cd simplify EU state aid/comp rules & speed up process for approving grants (it's still significantly slower than in the US)

8. In conclusion: IRA has caused consternation because it forces the EU to face up to industrial policy woes. As we’ve seen, industrial has ramifications for trade and foreign policy. It's going to be a key topic for next yr. So expect *lots more* from me on this.. END

The full piece is here. And I promise, EU industrial policy *is* fun. If you're into trade, foreign policy and/or transatlantic relations, then you shd really read it: institutmontaigne.org/en/analysis/re…

PS: I refer to excellent analyses by @niredeker & @onethuthree.