President Joe Biden hoped to ease a serious source of tension with Europe when he met with European Commission President Ursula von der Leyen at the White House on Friday.
The dispute is technical but highly contentious. It comes at a moment – a year into Russia’s invasion of Ukraine – when unity between the US and its European allies is already being tested.
The quarrel centers on a provision of Biden’s landmark Inflation Reduction Act that offered tax credits for electric vehicles. The law specifies in order to qualify for the credit, the vehicles must source a percentage of the material for their batteries from North America or countries with a free trade agreement with the US – which the EU does not.
The law has infuriated some of the United States’ top allies, like the EU, who say their countries are being penalized. The timing is inopportune, as Biden works to maintain transatlantic unity as the war in Ukraine enters a second year.
In their talks in the Oval Office on Friday, Biden and von der Leyen discussed the matter and announced a new set of negotiations that, if successful, would allow European companies to benefit from the Biden law and reduce both US and EU dependence on China.
“We have agreed that we will start work now with the clear goal: The goal is to have an agreement on critical raw materials that have been sourced or processed in the European Union, that these strategic supply chains are able to access the American market as if they had been sourced in the United States,” von der Leyen said outside the White House after the meeting concluded.
The two leaders also discussed the ongoing war in Ukraine, including plans to deepen cooperation on enforcing sanctions against Russia and third-party countries who are supporting Moscow’s invasion. That could soon include China, which US officials have warned is considering providing lethal aid to Russia.
Yet it is the transatlantic economic issues that formed the center of the talks, particularly the disagreement over Biden’s climate law, which European officials have slammed as protectionist.
The agreement the two leaders announced centered on the critical minerals that are necessary for electric vehicle batteries, perhaps unlocking for Europe some of the Inflation Reduction Act’s benefits.
“I look forward to talking about all that with you,” Biden said at the meeting got underway in the Oval Office.
“We’re driving new investments to create clean energy industries and jobs and make sure we have supply chains available to both our continents,” Biden said as the meeting got underway in the Oval Office. “That idea underpins our Inflation Reduction Act, and it lies at the heart of the your green deal industrial plan for the EU, and so I hope we can talk about that today.”
If not resolved, the issue could potentially spiral into competing subsidies that neither side wants, and add to strains caused by the war in Ukraine.
“What we want to do is maximize the amount of deployment, maximize the speed of that deployment, and do so in a way that builds each of our respective industrial bases. That isn’t going to happen if our incentives and their incentives are misaligned, and compete with one another in a zero sum way,” a senior US administration official said ahead of the meeting.
After Biden signed the law last year, European allies reacted harshly, setting off a scramble within the administration to resolve the issues while not angering members of Congress who supported the Made-in-America aspects of the law.
Among the top proponents of the measure: West Virginia Sen. Joe Manchin, the centrist Democrat whose support is critical for the White House on a number of issues.
Biden’s meeting Friday won’t completely resolve the matter, according to officials, but instead launch a process of arriving at a type of trade agreement that would meet the law’s requirements and allow European companies to help supply battery materials – like lithium and nickel – for electric vehicles.
US officials have been in similar discussions with counterparts from the United Kingdom and Japan to assuage those nations’ similar concerns about the Inflation Reduction Act.
It’s unclear how long the process might take.
“The goal here is to ensure that as we make our investments, as Europe make its investments, that our approaches are communicated, that we’re communicating with one another on our approaches so that we maximize the deployment of clean energy technology over time, and not that those incentives compete with one another,” the official said.