[Skybird]

The Frankfurter Allgemeine Zeitung writes:
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Biden's Rain of Money


As if the economic policy environment were not rough enough, the subsidy offensive in the United States is causing further headaches for the EU. It is also likely to have an impact on the dynamics in Europe.

The Tesla factory in Grünheide was considered a success project by German politicians. After just over two years of construction, the "Gigafactory" was ceremoniously opened in March. It was one thing that the American electric car manufacturer chose this town of 9,000 inhabitants in Brandenburg, of all places, as the location for its first factory in Europe. That the construction project was not ground down in the mills of German bureaucracy was the even greater achievement. Relocating lizards, clearing the forest, building the shell, final acceptance: it went like clockwork.

Until September 14. That's when news arrived from America that people in Berlin and Potsdam didn't like to read at all. The Wall Street Journal reported that Tesla was putting its second construction project in Grünheide, a large battery factory, on hold. Instead of Germany, Tesla boss Elon Musk now wants to invest more in America. The reason: the tax advantages offered by U.S. President Joe Biden. Even though Tesla has reportedly emphasized to its partners in Germany that only the time priorities have changed, but that the battery factory is coming, people in Germany are "not amused".

Russia's war in Ukraine, China's threats against Taiwan, the energy crisis, inflation - as if the economic environment hadn't become rough enough in recent months, the U.S. government's package of laws called the Inflation Reduction Act has added another layer to the mix.

Biden wants to make the U.S. less dependent on imports - possibly at the expense of close partners like Germany. The president's ambitions have rarely been more succinct than in his tweet on Aug. 14 of this year: "Imagine a world where people open the hood of their car and see the Made-in-America seal stamped into the battery." That's exactly what the Inflation Reduction Act delivers, Biden exulted after the bill passed Congress.

The electric car promotion crystallizes the Biden administration's three strategic goals: it wants to reindustrialize America, it wants to oppose China's political and technological hegemony efforts, and it wants to transform the economy in a climate-friendly way. The legislative package, which calls for some $430 billion in spending over ten years - roughly a double whammy [reference to a phrase Scholz used to describe his 200 billion energy aid package, Skybird] - has it all.

"No Congress has passed such an act of violence against the multilateral trading system as the 117th Congress did with the Inflation Reduction Act," says Charles Benoit, a trade expert with the nonpartisan Coalition for a Prosperous America. He means that in a positive way. Benoit welcomes the push because his organization advocates trade barriers as a necessary remedy for bleeding American industry.

Seventy-five hundred dollars in tax credits is promised by the government to any electric car buyer who meets the following clauses: Vehicles must be assembled in America. From 2026, 80 percent of the rare minerals for the traction batteries must be mined in America or in countries with which the US has a free trade agreement. So far, the EU is not one of them. Shipments from "suspect foreign entities" are generally prohibited - that targets China, but is sufficiently vague to exclude others. After a transition period, the batteries will then have to come entirely from America.

German industry is already investing heavily in the US. BMW has just announced plans to expand its Spartanburg plant for $1.7 billion in the coming years. The Munich-based automaker plans to produce six new electric car models there. Specialty chemicals maker Evonik opened a research center in Pennsylvania in early September.

And Peter Carlsson, the head of Swedish start-up Northvolt, announced last week in the Frankfurter Allgemeine Sonntagszeitung that he was reconsidering his planned billion-dollar factory to produce battery cells for electric cars in Schleswig-Holstein, not only because of horrendous energy costs, but also because of America's subsidy pots. Subsidies in the U.S., he said, lower production costs there by 30 to 40 percent. "We are now at a point where we may give priority to expansion in the U.S. over Europe for the time being," Carlsson said.

In Europe, all of this is met with astonishment. On the one hand, it is a "good sign" that the Americans now want to combat climate change with a "strong package," said German Economics Minister Robert Habeck (Greens) recently. But this package should not distort the competitive conditions, the so-called level playing field, between Europe and the United States. You can see, Habeck said, how companies are flirting with relocating because of the high subsidies, so Biden's Inflation Act needs a "strong response."

The German government, so often at odds, seems reasonably united on this point. Against the backdrop of U.S. location policy, European competitiveness must be strengthened all the more, Christian Lindner (FDP) warned. Chancellor Olaf Scholz (SPD) also expressed his willingness not to stand idly by and watch the American orgy of subsidies. He is receiving support from France, after things had not infrequently snagged between Berlin and Paris in recent months.

"We have to wake up," Macron said at the start of the Paris Motor Show, where the strong presence of Chinese manufacturers showed the importance and self-confidence they have acquired. However, the French president attested not only to China's "very offensive strategy of state aid" to support domestic manufacturers, but also to Washington. Macron also openly considered limiting domestic purchase premiums for electric cars to vehicles "made in Europe.

It is true that both Macron's man for finance and the economy, Bruno Le Maire, and the German economy minister explicitly emphasize that they want to avoid a trade war. But just by dropping this word over and over again now, they show how serious they consider the American action to be. The issue is likely to occupy the EU finance ministers at their meeting next week.

So far, the EU has not taken a unified stance in response to the American Inflation Reduction Act. This is also true within the EU Commission: While the responsible Trade Commissioner, Valdis Dombrovskis, is backing de-escalation and objective talks with Washington, because the EU is dependent on America as its most important trading partner and needs it on its side in conflicts such as those with China and Russia, the Internal Market Commissioner, Thierry Breton, who is not strictly speaking responsible, is advocating a tougher approach, as is the case in Paris and Berlin.

He has already initiated work on an industrial policy "Made-in-Europe strategy," Breton told the French business newspaper Les Échos on Friday. He said the EU remains open to companies from other economic areas - "but on our terms."

The EU and U.S. have set up a working group on conflict resolution. It met for the first time on Friday. Trade Commissioner Dombrovskis said the appropriate forum for conflict resolution is the Trade and Technology Council (TTC), which meets every six months. The commission said the EU would certainly not take action against Washington before the next meeting in early December. According to the trade commissioner, the ideal solution to the conflict would be for the EU to be granted the same exemptions from the law as Canada and Mexico.

In the Commission, however, that is not considered very realistic. At present, Dombrovskis does not want to go to the World Trade Organization (WTO) over the U.S. law. However, given the "big picture," that cannot be ruled out in the medium term either, according to the commission. Breton said he strongly supports "addressing the problem within the WTO framework." Bernd Lange, an SPD member of parliament, said that if nothing happened by Dec. 5, "it would be perfectly normal for the EU to go to the WTO."

One should not draw the conclusion from Biden's policy that the Americans are on a confrontational course with the EU, said Christoph Schemionek, head of the German Chamber of Commerce Abroad in Washington. The U.S. government, he says, is following its security policy goals and running an inward-looking country anyway. And indeed, the very establishment of the working group suggests that the Americans are trying to do damage control. EU Trade Representative Katherine Tai recently recalled this and the negotiated truce on aircraft tariffs and the agreement on the steel and aluminum sector.

But Tai also pointed to EU projects that the Americans don't like, such as the climate tariff, which is intended to make imports of products with large carbon footprints more expensive. And there is no shortage of other points of contention. Washington is watching warily to see how much Chinese influence there is in the German economy, especially in the auto industry. Daimler's two largest shareholders are Chinese investors. The fact that Scholz, against all warnings, allowed the Chinese shipping company Cosco to acquire a stake in the port of Hamburg also did not go down well in America.

The Europeans, in turn, are concerned about America's export ban on high-tech chips and chip technology. This affects the Dutch specialist ASML, which is the technology leader for machines to manufacture these chips. ASML already does not supply the latest generation of machines to China. Now, however, the Americans want to extend the export restrictions. ASML cooperates closely with two German companies, Trumpf and Zeiss. Berlin fears that secondary sanctions could also affect them. In addition, there is displeasure about the "moon prices" that Berlin complains America's exporters are currently charging for liquefied natural gas. The tenor is that this is no way to deal with friends, especially not in an energy crisis in which electricity and gas have been costing many times more than the usual prices in the USA for months. In relative terms, the Ukraine war is hitting the Americans much less hard than it is Europe.

In the view of Economics Minister Habeck, Europe has only one choice in view of the bloc formation in the world. Namely, that of also pursuing a stronger industrial policy. That means faster approval procedures and, above all, more money. He knows that the French are on his side. Various cross-border support programs, known as IPCEI, already exist. According to an overview from the German Ministry of Economics, EU member states have provided a total of 5 billion euros in subsidies for battery cell production in Europe. The private investment triggered by this is said to be many times that amount.

In the subsidization of chip factories, the sums involved are much larger still. According to F.A.Z. information, the German government alone has earmarked around 17 billion euros for semiconductor projects in its budget for the coming years. One of the biggest beneficiaries, however, is likely to be an American company: Intel wants to build a large chip factory in Magdeburg and can count on lavish government funding. There was recent talk of a total sum of up to 6.8 billion euros.
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This could lead to a trade war that both sides do not want by intention, but that emerges due to the inner dynamics of both side's different policies. America's Keynesian money policy will cause its desastrous consequences, no doubt, the boom bought by them is a boom on tic. But Europe has nothign ebtter to do then in the dfepths of the worst crisis since WWII making things even more difficult with self-induced "green" complications based on the ever worst climate prediction scenarios that even already have been falsified and shown to be wrong, becasue the Europeans, epseiclaly the germans, use climate arugments as an excuse to fight against capitalism and buregoiuse society in general. In the end, Ameica is on the stronger position, and enjoys far greater autarky in supplies with precious rare commodities as wellk as greater military power to guard itself or to push through its interests in other parts of the world, than Europe. Europe, currently loosing many of its traditional strong arguments in its favour like qualified workforces, good education and good infrastructure and energy security, has only one trump to impress the world with: moralistic posing and appealing tirades. The rest is helplessness and dependency.