Listen: Will ‘Made in Europe’ spark a new trade battle with the US?

Production: By Europod, in co-production with Sphera Network. EUobserver is proud to have an editorial partnership with Europod to co-publish the podcast series “Briefed” hosted by Léa Marchal. The podcast is available on all major platforms. Find the full transcript below: The US is unhappy with the direction European industrial policy is taking.Washington has made its concerns very clear to the EU. So, what exactly is the problem, and how could the EU solve it? Last week, the US administration sent an unofficial document to the EU, expressing its dissatisfaction with the EU’s plans to introduce European preference rules in its upcoming competitiveness fund. The reason is that the new fund and its rules could affect the way US companies work in and with Europe. The aim of the European competitiveness fund is to support the development of strategic industrial projects in Europe. And depending on the sector and the specific calls for projects, access to funding could be conditional on companies being established in Europe. This doesn’t mean American companies will no longer be able to invest in Europe in those specific sectors. But an American investor looking to set up a production site in Europe might not be eligible for European funding under the new rules. So they could be put at a disadvantage compared with a European competitor. And this could also affect American suppliers. Imagine you are a German entrepreneur developing a strategic industrial project in Europe and you rely heavily on US suppliers for your materials. You might decide to relocate your supply chain to Europe in order to meet the fund’s criteria and qualify for funding. Now, could the US work around these new rules? There is a way to avoid this discrimination. The US could conclude an agreement with the EU to be associated with the Fund. And this is precisely what the Americans are asking for in their letter. The problem is that when the EU concludes these kinds of association agreements, partner countries generally have to pay to participate. For example, Canada and the UK are associated with Horizon Europe, the EU’s research and innovation programme. But they had to make financial contributions to take part. And that is something the US does not want to do. So Washington is asking the EU either to drop the whole idea of European preference, or to ensure that US companies can receive the same treatment as European companies. Otherwise, the US is threatening retaliatory measures. For example, it could impose similar restrictions on European companies. And the US makes that threat quite clear in its document. So, what is the way out for the EU? One option would be to stay on the same course and hope that the US does not follow through on its threat. But another option would be to allow the US to participate in the European Competitiveness Fund, and ask for a different kind of concession. One possibility could be US tariffs on European steel. European countries have been asking for these tariffs to be removed for months, without success. So this could potentially become part of a wider negotiation. That’s one possible scenario, at least from my perspective, as a journalist who has covered EU-US trade relations for several years. But my experience also tells me that the US is a very tough negotiator, so none of this is going to be easy.