The Inflation Reduction Act’s implications for US Efforts to Engage Allies and Trading Partners
In an increasingly challenging geopolitical and economic climate, strengthening the U.S.-EU bilateral relationship and ensuring that their shared values and interests are protected while preserving free and open competition, supporting the global competitiveness of their economies, and enhancing their shared international leading role has never been more important.
The recent Ministerial Trade and Technology Council (TTC) summit exemplifies how the EU and U.S. can foster an open, collaborative and competitive transatlantic partnership that benefits both economies.
ITI and its member companies are resolute in our support for U.S. and EU efforts to strengthen cooperation with allies and trading partners. The TTC presents opportunities for engagement that benefit the economy and address global challenges like climate change and supply chain security and resiliency.
Policies that increase domestic content requirements, such as those in the Inflation Reduction Act (IRA), do so at the detriment of U.S. competitiveness and present real opportunity costs for transatlantic engagement. The U.S. expansion of domestic content requirements in the IRA does not reflect the global nature of supply chains and undermines collaborative efforts to promote policies that reflect U.S. and EU shared values. These trade irritants also make it harder for the U.S. and EU to counter rising digital authoritarianism and protectionist policies in other markets.
We encourage the U.S. Government to find a negotiated solution that addresses the IRA discriminatory elements. If implemented in a non-discriminatory way, the IRA can also bring about opportunities for EU-U.S. cooperation, leading to more transatlantic investment and growth. Both sides can seize the opportunities stemming from the green and digital transitions while avoiding the creation of new barriers to transatlantic trade.
Avoiding discriminatory and exclusionary policies on both sides of the Atlantic is essential. The EU and U.S. need to work together to prevent new trade frictions, and resolve existing problems that risk undermining their bilateral cooperation. These include addressing discriminatory treatment in the IRA, as well as avoiding discrimination and market-distorting measures in European digital regulatory policy, for example those excluding or limiting access for non-EU headquartered companies in cybersecurity certification schemes like the EUCS or in standardisation processes. Policies should be developed in an open, transparent and inclusive manner, and should not exclude entities based on criteria such as location of operations and should respect the America’s commitments to equal treatment and non-discrimination.
The U.S. is stronger when it works with allies and trading partners. To achieve its ambitious domestic agenda, we encourage the United States to implement policies based on trust and cooperation with international like-minded democratic partners, in ways that are compatible with the U.S.’s longstanding commitments to free trade, and not based on the false premise that excluding or discriminating like-minded partners is the way to strengthen U.S. competitiveness.
There is also risk of other governments adopting similar policies that will prevent the United States from exporting goods and services to other markets. At a time of both serious global challenges and opportunities for strengthened partnership with allies, advancing policies that isolate the United States risks distracting from the realization of security, economic, and diplomatic objectives.
The EU and U.S. should engage in early and frequent dialogue during consideration and implementation of relevant legislation to reduce the likelihood of unintended consequences. The creation of an early alert mechanism in the TTC - modelled for example on the task force created to address the IRA concerns - would help identify and avoid trade barriers, and ensure other actions do not come at the expense of the transatlantic partnership.
As a strong supporter of the TTC, ITI looks forward to continuing to partner with governments to ensure the TTC remains a successful partnership, and pursue an enabling environment for innovation, competitiveness, and security.