[US]The "Great West" tearing open the rift? How to rationalize the differences between the US and Europe
Author: Sun Chenghao, Assistant Researcher, Center for Strategic and Security Studies, Tsinghua University
Recently, French President Macron visited the United States and one of his main tasks was to mediate the dispute between Europe and the United States over trade subsidies. On the first day of his visit, Macron directly pointed out the "aggressive" subsidy measures taken by the Biden administration to support his country's industry and called for greater coordination between the US and Europe in this area.
It is clear that the Inflation Reduction Act introduced by the US has triggered a new round of disputes and disagreements between the US and Europe. Since the escalation of the crisis in Ukraine, there have been two views on US-European relations, with one voice suggesting that the joint US-European response to the crisis once again reflects the unbreakable transatlantic solidarity and the increasingly solid "united front" of the "Great West". The "Trump shockwave" did not affect the core of U.S.-European relations; while another voice believes that the new round of disputes around industrial subsidies just proves that U.S.-European relations are far from being as close as imagined, and the distance between the Atlantic seems to be getting wider and wider.
Both voices have some truth to them, and each is biased. In an international environment where the epidemic of the century is compounded by the game of the great powers, US-European relations are inevitably adjusting dynamically, with both the cooperative and competitive sides rising, but not yet escaping the framework of the "great power" game under the alliance.
On the face of it, this round of disputes over industrial subsidies is a reflection of the long-standing US-European game of trade and rules, and is nothing new. Since the economic recovery of Western Europe in the 1960s, there have been divergent and competing interests between the US and Europe in the economic sphere, and as the Trump administration embarked on the road of "America First", the competition between the two sides in the economic and trade sphere became more intense. During Biden's presidency, the US-EU dispute in the economic and trade field has eased, in particular, the two sides reached a "truce" on the aviation subsidies dispute, while the EU took the lead in suspending retaliatory tariffs on US steel and aluminium products in May 2021, while the US and the European Commission set up a joint working group to continuously resolve the dispute on the issue.
The Inflation Reduction Act, however, has reignited European anger. The European side argued that the subsidies provided by the Inflation Reduction Act to US companies in areas such as green hydrogen and semiconductors would have a negative impact on EU industrial competitiveness, investment and the transformation of the green economy, and that despite the establishment of a joint working group to coordinate between the two sides after the introduction of the Act, the issue remained unresolved. In the context of the delayed crisis in Ukraine, an exhausted Europe is also thinking about its own interests, and the European strategic community is even openly questioning whether the US is making "war money" and whether Washington is still an ally of Brussels.
The best prospect the EU can envisage is to shake hands with the US and bring European companies into the scope of US subsidies to prevent further flows of European companies to the US, but I am afraid the EU's means are limited. If the EU uses the WTO platform for symbolic protests or formally sues the US, it will be difficult to achieve timely results. If the EU imitates the US subsidy rules and proposes an EU version of the subsidy scheme, it may work in the short term, but in the long term it will undermine the EU's reputation for supporting multilateralism and free trade, and bring irreversible damage to the EU's proud "normative power".
There is also very little the Biden administration can do. Although Biden said in response to European questions that the previous bill had "minor errors" and that "we will not create manufacturing jobs at the expense of Europe," the Biden administration, which lost its majority in both houses after the midterm elections and faces a divided government, is afraid that it will be difficult to reverse the core provisions of the Inflation Reduction Act. The Republican Party will not let Biden take it lightly. The Republicans will not make it easy for Biden to get what he wants in Congress, and the key Democrats in the Senate are unwilling to give up elements of the bill that would stimulate domestic manufacturing competitiveness.
Ultimately, Europe will be faced with a more ambivalent US in terms of foreign strategy, and its wisdom will be tested by the ability to compartmentalise its allies on different issues in its own interests. The new US National Security Strategy report shows that the Biden administration is trying to balance investment in domestic and coalition allies, hoping to break down domestic and international boundaries and promote so-called "middle-class diplomacy". However, in the eyes of allies, including Europe, "middle-class diplomacy" is not fundamentally different from Trump's "America First", and the Inflation Reduction Act has once again confirmed Europe's concerns.
Europe is not indifferent and is actively promoting bills and policies to strengthen its "strategic autonomy" in the face of changing circumstances. In the field of chips, which is of great concern to both the US and Europe, the Chip and Science Act introduced by the US has also caused great complaints in Europe. Macron said the Chip Act and the Inflation Reduction Act would freeze cross-border investment on both sides of the Atlantic, damaging US-European relations and dividing (fragment) the West. The European Commission adopted the European Chip Act in February this year, in part to hedge against US moves in the chip sector, strengthen the EU semiconductor ecosystem, secure the chip supply chain, reduce international dependence and better promote the EU's green and digital transformation.
The emergence of these differences between the US and Europe at a time when the Ukraine crisis has not yet subsided seems to give the impression that the severity of such differences has overwhelmed the common geopolitical needs of both sides, or that fatigue with the crisis has made it difficult for the US and Europe to conceal more acute conflicts. But historically, the US-EU rivalry and disagreements in the areas of trade, economics and rules have been consistent, and are not the result of the Biden administration, let alone the Ukraine crisis.
Therefore, neither should we think that the US and Europe will become more and more "ironclad" under the influence of the Ukraine crisis, nor should we think that the differences between the US and Europe have overwhelmed the united side, nor should we overly magnify the challenges facing the US-European alliance, thinking that the US-European relations are already in crisis. The differences between the US and Europe are still internal conflicts within the framework of the alliance, and it is difficult to go beyond the framework of representative democracy plus capitalist market economy in the short term. It is also the basis of the "institutional advantage" and even the "civilizational advantage" that the West, mainly in the US and Europe, considers itself to hold the moral high ground in the world.