Britain joins EU in criticizing Biden’s green subsidy package | Daily News Byte

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Britain has joined international criticism of Joe Biden’s massive US package of green subsidies, warning that they are protectionist and will hit UK-based manufacturers of electric vehicles, batteries and other renewable equipment.

UK International Trade Secretary Cammy Badenoch has written to her US counterpart, Catherine Tay, protesting the constitutionality of the Biden administration’s $369 billion effort to green the economy.

The Inflation Reduction Act (IRA), which passed Congress in August, includes tax credits for green technologies aimed at attracting investment in the US and reducing carbon emissions.

The European Union, South Korea and Canada are among those who claim the act violates World Trade Organization rules by tying aid to US domestic production, but so far Britain has kept a low profile on the issue.

In his letter, seen by the Financial Times, Badenoch claimed the US plan would “damage multiple economies around the world and affect global supply chains in batteries, electric vehicles and broader renewables”.

Although she welcomed US efforts to address climate change, Badenoch warned that they must not come at the expense of free trade and that both sides must adhere to the rules of the international trading system.

A particular bugbear is a provision to ban a $7,500 subsidy for the purchase of electric vehicles that are substantially manufactured with North American parts and assembled there.

Raw materials for batteries will need to be sourced from countries that have free trade agreements with the US, excluding the EU and the UK.

However, President Biden has indicated that the provision could be interpreted to include “associates” because Congress, when it wrote the act, did not mean to exclude them.

This month the US Treasury said it plans to release more information on the “expected direction” of the IRA’s tax credit scheme for critical minerals and battery components before the end of the year, but will not issue full details until March.

Badenoch said in his letter that if special deals were on the table, Britain should get one: “The UK, as the US’s closest ally, expects and should be part of any flexibility in the implementation of the IRA.”

“We’re not sitting back,” said one of Badenoch’s colleagues. “We are talking to the US about this almost every day.” Badenoch said any protectionism would benefit “our most prominent competitors” – seen as a reference to China.

Britain, with its stretched public finances, is in the same position as a number of EU countries that would be extremely reluctant to enter a subsidy race with Washington.

Biden has promised “tweaks” to how the law is implemented and delayed changes on electric vehicles from January to March.

A joint EU-US task force is identifying possible amendments that could be made without sending the Act back to Congress. The US Treasury and the Internal Revenue Service, the US tax authority, are currently in the process of consulting with industry on how to implement the law.

US allies hope that gray areas in the bill’s language can be used by Treasury officials to soften the impact on foreign businesses.

EU officials hope they can use a loophole that means commercial vehicles don’t have to be assembled in the US to qualify for a $7,500 consumer tax credit. Vehicles leased by individuals can be classified as commercial sales, who are savvy negotiators.

The EU has said it is working on changes to its subsidy rules to allow more money to be sent to businesses facing US competition.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders Group in the UK, said: “The UK and US automotive industries have a long-standing and productive relationship, supporting jobs and vehicle manufacturing across the Atlantic. Measures supporting free and fair trade between us should, therefore, promote rather than protect individual markets.”

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