France, Germany discuss plans to protect Europe’s EV makers

Europe

French President Emmanuel Macron is looking to enlist German Chancellor Olaf Scholz’s support for a new plan to help European automakers compete with the U.S. and China, after President Joseph Biden outlined heavy subsidies benefiting electric cars made in North America.

Though they have squabbled over defense and energy policies, Paris and Berlin agree that the European Union needs to do more to promote national industries, officials in both capitals said.

In a Wednesday interview on France 2 television after meeting Scholz in Paris, Macron said the two leaders were converging on the idea of assuring that EU car subsidies are used for European-made vehicles.

That could help blunt the effects of the U.S. Inflation Reduction Act, which among other provisions offers subsidies for electric cars made in North America.

“You have China and the U.S. protecting their industry, but Europe remains open to all winds, we must change,” Macron said on France 2. “France and Germany must stick together because we have been too open, because many of our automakers were selling a lot in China and they did not want to close things.”

Scholz has echoed this view, according to a person familiar with the German leader’s thinking.

Macron in 2017 pushed for what he called the Buy European Act for public procurement, which would apply to companies with more than half their production in the bloc.

But he was forced to abandon the idea in the face of opposition from Brussels.

Germany also opposed the plan, citing consequences for trade with China and the U.S., particularly for automakers Volkswagen Group, Mercedes-Benz and BMW.

Since that time, however, the COVID pandemic has exposed Europe’s dependency on overseas supply chains and the EU has effectively relaxed some of its rules on state aid, suggesting that new initiatives to shield companies from competition could find support in Brussels.

Still, reviving the Buy European idea now for electric vehicles may prove complicated, even with Germany on board.

Free trade accords could have to be renegotiated and the measure could run afoul of existing EU rules, or World Trade Organization agreements. It could also spark a trade war, with other countries enacting retaliatory measures.

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