Emmanuel Macron’s state visit to Washington this week and the upcoming meeting of the US-EU Trade and Technology Council on Monday are important tests of whether the western world can avoid a return of destructive beggar-thy-neighbour policies which already once destroyed the global trading system in the 1930s.
The most recent point of contention centres on the American Inflation Reduction Act’s provisions aimed at supporting US manufacturers of electric vehicles, to the exclusion of European ones. While at a joint press conference with his French counterpart, the US President Biden vowed to fix the ‘glitch’ in his signature piece of legislation. But doing so remains a tall order, particularly with a Republican-controlled House of Representatives.
Unless the remedy is swift and effective, both the German and French governments can be expected to continue pushing the EU to respond in kind, putting in place a similar subsidy programme tailored exclusively for European manufacturers.
The new economic policy monoculture that Berlin and Paris are trying to instil in the is bad news.
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