U.S., EU Agree to Coordinate Semiconductor Subsidy Programs

European officials said they would continue to press Washington to address their concerns in the guideline the U.S. is set to roll out by Jan. 1 on how to implement the EV legislation. 

The EU and the U.S.’s key Asian allies say the new EV subsidies, introduced under the Inflation Reduction Act, discriminate against their companies with its North American assembly and contents requirements. 

The officials met outside of Washington for a ministerial meeting of the U.S.-EU Trade and Technology Council, a forum established last year to boost cooperation in key areas such as advanced technology, supply chains and climate policies. The Council is part of the Biden administration’s effort to strengthen ties with allies and friendly partners to counter China’s influence.  

Secretary of State

Antony Blinken,

Secretary of Commerce

Gina Raimondo

and U.S. Trade Representative

Katherine Tai

represented Washington. European Commission Executive Vice Presidents

Margrethe Vestager

and

Valdis Dombrovskis

led the EU side.  

Even as the EV dispute cast a shadow over the meeting, the two sides stressed concrete achievements made through the TTC framework, including the agreement on semiconductor supply chains, an area where both sides are accelerating efforts to beef up their domestic industries to cut reliance on Asian suppliers.

Earlier this year, the U.S. passed the Chips Act, a $280-billion legislation to provide subsidies and support for research and development to increase domestic production. The European Union introduced similar legislation, raising concerns that global semiconductor companies may pit one against the other to get better deals or create oversupplies in the long run. 

To address that, the Commerce Department and the European Commission agreed to set up a common mechanism for reciprocal sharing of information about public support programs, including methodologies and best practices as well as developing common understanding of market dynamics. 

They are also implementing an early warning mechanism to address and mitigate semiconductor supply-chain disruptions. 

“Transparency is a key tool to avoid concerns over public support programs,” the U.S. and EU said in a statement. 

Monday’s meeting took place as governments from Europe, South Korea and Japan piled pressure on Washington to address their concerns about its EV subsidies program. Following his meeting with Mr. Macron on Thursday, Mr. Biden said the U.S. could make “tweaks” to the Inflation Reduction Act, which provides subsidies to U.S. manufacturers and tax incentives for electric vehicles and other products that are assembled in North America. Any changes would be designed to make it easy for European companies to participate in the program. 

“We’ve heard concerns clearly from our European friends about certain specific aspects of legislation,” Mr. Blinken said following Monday’s meeting, adding that he’s convinced there is a path forward.

“We need also to see what can be done within the implementation of the Inflation Reduction Act,” said Ms. Vestager. “But the most important thing is the U.S. is fully engaged in fighting climate change.”

Meanwhile, the EU could modify its own subsidies and consider new funding in response to the IRA, European Commission President

Ursula von der Leyen

said during a speech on Sunday.

The EU must “take action to rebalance the playing field where the IRA or other measures create distortions,” Ms. von der Leyen said. She said there is a risk the U.S. legislation could lead to unfair competition and fragment supply chains that were already tested by the Covid-19 pandemic.

Ms. von der Leyen raised the possibility of a European sovereignty fund, which she said could support companies working on clean-technology innovation and other climate-related projects.  

The Treasury Department’s Internal Revenue Service faces a year-end deadline to propose a guideline for how to qualify for EV tax incentives of up to $7,500 per vehicle under the tax and climate spending in the IRA that Mr. Biden signed in August.

While the IRA has already established the key features of the tax-incentive program, foreign government and auto-industry officials say they are hoping the Treasury will address some of their concerns through flexible interpretation of the law.

At Monday’s meeting, the two sides also unveiled a new road map for evaluating artificial intelligence and associated risks and developing common standards for charging systems for heavy-duty electric vehicles.  

On export controls, the two sides have agreed to launch a pilot program to identify ways to simplify trans-Atlantic trade of dual-use technologies—used for both civil and military purposes such as semiconductors—as well as more coordination when revising lists for restricted items. 

To better counter China’s nonmarket practices, the officials have also started exchanging information on Chinese medical-device firms, as well as China’s use of investment funds, the two governments said.

— Kim Mackrael contributed to this article.

Write to Yuka Hayashi at [email protected]