‘Discriminatory’ measures in U.S. Inflation Reduction Act still need addressing, top EU minister says

The European Union still believes President Joe Biden‘s Inflation Reduction Act discriminates against companies in the bloc, its top trade minister said Thursday.

However, Valdis Dombrovskis told CNBC that the EU was engaged in ongoing negotiations with U.S. officials that had allayed only some of its concerns so far. He noted he met with U.S. Trade Representative Katherine Tai two days ago, a meeting at which the pair pledged to increase engagement on key issues including electric vehicle subsidies.

“Our concerns are the discriminatory measures in [the] U.S. Inflation Reduction Act, which is discriminating against EU companies,” he said in an interview at the World Economic Forum in Davos, Switzerland.

“We think we should be addressing the climate change and green transition jointly, building 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 host of its provisions — including green subsidies such as 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 into a trade war, Dombrovskis said: “Currently we are focusing on negotiated solutions, we are reaching out to U.S. authorities at different levels.”

“We have a dedicated EU-U.S. task force which continues its work. We have made some progress, some of our concerns are being addressed, but there are still concerns which need to be addressed.”

On what the EU’s response would be if it was not satisfied with the outcome 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, as well as the IRA.

That is set to include a review of existing EU subsidies and funds and whether they are being used most effectively.

Dombrovskis also said they were looking to adjust the EU’s strict state aid rules to allow member states to provide more support for companies aiding the green transition, as previously called for by European Commission President Ursula von der Leyen.

“But there of course we need to be carefully framing it to maintain a level playing field within the EU single market,” Dombrovskis said.

Ireland’s Finance Minister Michael McGrath told CNBC Wednesday the EU wanted to avoid a “subsidies race” with the U.S., and that any changes to state aid rules must not benefit countries with the “means and resources” to provide greater support to companies than others.

Meanwhile, Spanish Prime Minister Pedro Sanchez said Monday the EU could learn lessons from the IRA.

“We need to reform some internal aspects of our industrial policies such as state aid, reducing bureaucracy and trying to send a message for the industry worldwide that’s it’s Europe, and of course Spain, that is a good place to locate,” he added.

—CNBC’s Silvia Amaro contributed to this article.