Welcome to Trade Secrets, this week from Washington, standing in for Alan Beattie while he takes a short break. I’ll take the opportunity to focus on something close to home: the ever growing problems of Joe Biden’s great green spending splurge.
US green subsidy row switches to EV chargers
Just when it seemed President Joe Biden couldn’t annoy Brussels any more than he already had with his blockbuster set of green subsidies . . . out came the US Department of Transportation with its mundane-sounding new rules on electric vehicle chargers.
Chargers should have common standards so that any car can use them, the administration said, but they should also be made in the US with American parts if they want to access government cash.
Part of the shot across the bows was aimed at Tesla, whose charging network snakes across the US but is currently open only to Tesla owners. But the Made in America twist, which has become a standard issue condition of any new subsidies, prompted further howling in Brussels from both the business lobby and officials.
Does Biden care? It looks increasingly like he does not.
As Alan explained in January, Biden’s position takes in several, sometimes conflicting objectives, including — broadly — tackling climate change by supercharging the US clean tech rollout, securing American supply chains, creating US unionised jobs and rebuilding global alliances damaged by four years of Donald Trump.
A lot has been written about the path Biden’s team has to pick between boosting American jobs and manufacturing, and appeasing US allies and partners — many of whom Washington wants help from on things like, say, blocking exports of sensitive tech to China. On the one hand, about $90bn of capital has been committed to new projects in the US since the passage of the IRA last year, according to figures compiled by Climate Power, a Democratic strategy group. On the other, foreign governments are furious with what they see as discriminatory trade practices.
But actually, as various parts of the administration work their way through the business of putting the Congressional legislation into practice, it seems it’s not really a balancing act at all. In recent weeks, the mood in Washington has hardened against the pleas from US trading allies.
At the start of the year, there was a great sense of hope among diplomats that, although the law discriminated against their countries’ companies, the worst effects could be mitigated as the specific rules and regulations were written by the US Treasury. Biden himself in late December said “tweaks” could be made.
But those hopes are fading.
Among companies, too, earlier ambitions for liberal interpretation of the legislative text from the Treasury — that, say, a “free trade agreement” could be made to include loose, existing deals that were not congressionally ratified trade agreements — have faded.
Lots of multinational companies, particularly those with an eye on the battery supply chain, such as car companies and battery manufacturers, are worried about rules that reward companies using minerals sourced or processed in countries with a free trade agreement with the US.
Countries with large mineral deposits, such as Argentina, which has lithium, or Indonesia, which has nickel, risk being left out in the cold. European countries that process the minerals also stand to lose out.
Treasury secretary Janet Yellen in late January said the US did not currently have any sort of agreement with the EU or Japan (thus ruling out counting the Trump-era mini-deal) that could pass the test. But perhaps, she said, a new deal could be struck around trade in critical minerals.
This dashed the hopes of anyone who thought the Treasury’s guidance, released in late December, indicated that the definition of “free trade agreement” would be subject to a liberal interpretation.
In that same guidance the Treasury did say electric vehicles that were leased would not have to meet the stringent “made in the US” and battery supply chain requirements to get the tax credit.
Officials in Brussels have cautiously welcomed the administration’s exclusion of leased cars from having to meet the conditions for securing the full tax credit. But Treasury officials have been quick to point out that this is not a concession. This is simply a straight-down-the-line application of existing US tax laws.
On the other side of this are the US domestic concerns — Biden came into office pledging to be a union man. The trade unions, including United Auto Workers, International Association of Machinists and Aerospace Workers, United Steelworkers, backed by AFL-CIO, have all written to the White House demanding that there are no delays or technical changes made to the law as written. No “tweaks” to help allies, in other words.
And so far, that’s the way it seems to be going.
As well as this newsletter, Alan Beattie writes a Trade Secrets column for FT.com every Wednesday. Click here to read the latest, and visit ft.com/trade-secrets to see all his columns and previous newsletters too.
Trade links
Developing nations have warned against reshaping the World Bank in the aftermath of David Malpass’s departure as its head in a way that would imperil the institution’s triple A credit rating.
Australia has rattled some of its trading partners with energy price caps and planned export controls designed to cushion its population from rising prices.
British prime minister Rishi Sunak hopes to seal a deal with Brussels on post-Brexit Northern Ireland trade rules early this week, rejecting calls from former UK premier Boris Johnson to take a more confrontational approach.
Clothing companies behind some of the world’s biggest brand names have begun to shift away from mass textile production in China as they seek to reduce supply chain risks.
Trade Secrets is edited by Jonathan Moules
