UK joins EU in lambasting US green stimulus package

International Trade Secretary Kemi Badenoch says US plan is protectionist

Kemi Badenoch outside Downing Street. Reuters

Britain has joined EU criticism of US President Joe Biden’s flagship green stimulus package, warning that it would harm UK industry and economies across the world, it was reported on Friday.

The UK’s International Trade Secretary Kemi Badenoch told US counterpart Katherine Tai that the $369 billion US plan, approved by Congress in August, would “harm multiple economies across the world and impact global supply chains in batteries, electric vehicles and wider renewables”, according to a letter seen by The Financial Times.

Described as the most significant climate bill in US history, the Inflation Reduction Act is aimed at boosting US-made renewables. In the past months, EU leaders have repeatedly described it as discriminating against European automotive and renewable battery industries.

Europeans have said that the bill breaches World Trade Organisation rules. They are particularly concerned by one of the act's provisions to restrict a $7,500 subsidy for purchase of US-made electric vehicles.

EU Commission President Ursula von der Leyen last week described its “buy American logic”, discriminatory tax breaks and protection subsidies as “particularly worrisome.”

She called for a “European IRA” and is expected to put forward a full response in January.

EU officials, who have been negotiating with US counterparts for the past weeks as part of a high-level task force, have also made public their desire to be granted exemptions similar to Canada and Mexico.

In her letter, Ms Badenoch said that “the UK expects to be and should, as the closest of US allies, be part of any flexibilities in the implementation of the IRA.”

Earlier this month, Mr Biden said that he could “tweak” the act to include European countries during a state visit by French President Emmanuel Macron. Some members of the French government have called for the EU to file a complaint against the US at the WTO.

Speaking at the last summit of European leaders in Brussels on December 15, Mr Macron called on Brussels to simplify rules for companies to receive green subsidies in addition to putting more money on the table to match the US. “We have to catch up,” he said.

Some European countries have stayed quiet on the act out of fear that an all-out trade war between the US and the EU would benefit competitors such as China at a time of geopolitical uncertainty amid a war in Ukraine.