December 19, 2022

Unintended Consequences of U.S. Industrial Policies: Discord in the Transatlantic Alliance

The European Union’s (EU) internal commissioner, Thierry Breton, recently pulled out of the US-EU Trade and Technology Council (TCC) Summit. According to his aide, the summit “no longer gives sufficient space to issues of concern to many European industry ministers and businesses.” His decision is the latest signal of growing tension between the United States and its European allies over a series of U.S. actions taken to protect and strengthen its own industrial base—including the Inflation Reduction Act (IRA), and new semiconductor export controls.

Each of these steps is intended to bolster U.S. industrial capacity, limit Chinese access to U.S. semiconductor technologies, and better secure American interests in the face of an increasingly aggressive People’s Republic of China (PRC). However, if the United States ignores the collateral damage done to allies, it is starting down a counterproductive path on which it can lose the support of European allies “who add significantly to our own strengths.”

The transatlantic alliance will continue to face significant challenges in the coming years, not least the political and economic fall out of the Russian war in Ukraine

The IRA, passed in August, is designed to boost clean energy, reduce healthcare costs, and increase U.S. tax revenue. The Act allocates roughly $400 billion toward reducing U.S. carbon emissions within the next decade. There are four primary climate change sectors targeted in the Act: improving domestic manufacturing capacity, securing critical mineral supply chains domestically or from free-trade partners, accelerating research and development, and commercializing green energy technologies.

Read the full article from Encompass Europe.

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