President Joe Biden and European Commission leader Ursula von der Leyen will likely make their meeting at the White House on Friday convivial, despite trade tensions and the pressure of the war in Ukraine.
(Bloomberg) — President Joe Biden and European Commission leader Ursula von der Leyen will likely make their meeting at the White House on Friday convivial, despite trade tensions and the pressure of the war in Ukraine.
They are seeking to avoid a trade clash after the US pushed through a $369 billion package to bolster the development of clean technology. To that end, they are expected to agree on a path that would allow European firms to benefit from some of the subsidies for batteries offered only to producers in the US.
The US and EU will announce the launch of negotiations on a critical minerals agreement, a dialog on subsidy transparency and will aim to set a deadline to finalize talks on a global arrangement on steel and aluminum carbon intensity, senior Biden administration officials said.
The likely truce also reflects the desire of both leaders to showcase the strength of the transatlantic alliance in supporting Ukraine against Russia’s invasion.
The US would also like to see the European Union move closer to its more hawkish stance on China, particularly amid concerns that Beijing might do more to support Moscow. Yet the EU, which has tried to maintain a more nuanced approach, doesn’t want to talk about a new cold war.
Here are the main issues to watch:
Clean-Tech Race
After an initial wave of panic over generous subsidies in the US climate law, the EU wants to see how flexible the Biden administration can be in applying it. The Europeans still believe the Inflation Reduction Act contains some discriminatory elements, chiefly relating to electric vehicles, but the bloc isn’t currently considering taking the US to the World Trade Organization, people familiar with the matter said.
Instead, the EU’s executive arm is working to strengthen its own suite of offerings to boost industry in Europe, most immediately by making its funding more flexible and tweaking its state aid regime. In addition, Europe has been discussing some concessions that would allow its firms to benefit from the US green package without having to relocate to the US.
“I’ve spoken to my European friends, the heads of state. We’re not trying to deny them anything,” Biden said Thursday in Philadelphia.
Biden and von der Leyen are expected to agree Friday on a path toward a deal on minerals and raw materials that would allow European firms to benefit from some of the subsidies for electric-car batteries offered only to producers based in the US.
US officials hope to “commit to a deadline for finalizing negotiations on the global arrangement on sustainable steel and aluminum,” National Security Council spokesman John Kirby told reporters Friday.
Negotiations will be limited in scope to relevant critical materials in specific supply chains and the agreement will have strong labor and environmental commitments, but the senior Biden administration officials declined to provide more details ahead of the meeting.
The final arrangement would allow the EU to qualify for benefits under the IRA law by meeting requirements defined by the Treasury Department, the officials said.
“We certainly expect transatlantic economic issues to be the central focus of the meeting, including our Inflation Reduction Act and the EU’s Green Deal industrial plan that they’re working on right now,” Kirby said.
Read more: Europe Banks on Its €72 Billion to Counter Biden’s Green Payouts
Ukraine
Dwindling stocks of ammunition and other military equipment will hover over the discussions of the war, now in its second year. The EU is trying to cobble together a strategy to step up production, but questions remain over funding and other details.
The allies are also discussing ways to maintain pressure on Russia. The leaders are expected to commit to deepen cooperation on sanctions enforcement and take new steps to target third countries that are supporting Russia’s war. Kirby said the conflict would be a major topic of discussion.
The EU is sending its envoy on sanctions enforcement to countries, including the United Arab Emirates and possibly Turkey, and the bloc is also discussing further ideas to prevent the flow of components and chips that could make their way to the Russian army.
In the slightly longer term, Washington and Brussels must agree on an approach for providing reliable financial support for Ukraine, as well as on planning the eventual reconstruction of the country. The EU arguably has more bureaucratic clout to help manage the billions that would be spent on such a project, but the US will want a central role.
Energy Security
Von der Leyen has been effusive in her praise of Biden’s help in addressing a European energy crunch provoked by Russia’s cutoff of natural gas supplies. The US has pledged to provide additional shipments of liquefied natural gas, among other steps.
Some European officials have quietly grumbled about the windfall profits that US energy producers are raking in, but von der Leyen is likely to focus on how the US can help the EU prepare for next winter. The pair may also discuss efforts to calibrate price caps that the EU and Group of Seven have imposed on Russian exports of crude oil and refined petroleum products like diesel.
China
Beyond trying to deter China from providing support to Russia, the US wants to continue to and build on forging a united front with Europe to counter what it sees as China’s assertive political and economic stances.
The US believes there is unprecedented alignment between the allies on concerns posed by China, including on economic coercion or other non-market practices, and the leaders are expected to speak to that topic in detail, the senior Biden administrations said.
After pressure from Washington to limit China’s access to certain kinds of valuable technology, the EU is now ready to discuss a bloc-wide approach to export controls on advanced chips. The discussion follows a move by the Netherlands to restrict some of its supplies.
Valdis Dombrovskis, a European Commission vice president, told reporters Thursday that he “could argue we need a stronger EU role to ensure coherence in our policy on security, trade and technology.”
Read more: EU Ready for Coordinated Approach to Advanced Chip Restrictions
Future Concerns
Beneath the surface, EU officials are also starting contemplate what its relationship with the US would be like if Biden is not reelected in 2024. Still scarred from the presidency of Donald Trump, Europe is contemplating how to deal with a less reliable ally in Washington.
Von der Leyen’s term also ends next year and it’s unclear whether she will seek — or get — another one. US officials have been very pleased with her leadership, particularly on Ukraine, and may not be eager to have to adapt to a different successor if the war continues.
–With assistance from Justin Sink.
(Updates with Kirby comments starting in 11th paragraph)
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