Transatlantic economic deals still elusive, but edging closer

THE European Union (EU)-United States summit on Oct 20 between US President Joe Biden, European Commission President Ursula von der Leyen, and European Council President Charles Michel was full of warm words. Yet it failed to deliver on two key economic agendas where deals had been hoped for.

Firstly, the two sides seized defeat from the jaws of victory with a proposed deal to allow EU-based carmakers to benefit from US subsidies under the Inflation Reduction Act (IRA) which provides some US$390 billion of tax credits to green technology firms in the United States. What is being proposed is a targeted agreement for critical minerals such as cobalt, graphite, lithium, manganese and nickel for the purpose of expanding access to critical mineral and battery supply chains. This would enable those minerals extracted or processed within the EU to count towards requirements for partial tax breaks on clean vehicles in the Section 30D clean vehicle tax credit of the IRA.

A similar US deal was agreed with Japan earlier this year, yet complications continue to bedevil the US-EU counterpart negotiations. In part, this is because the United States is asking for more from the EU than is in the template of the US-Japan deal signed in March.