EU, U.S. Eye Level Playing Field for EU Electric Cars in U.S. Market

FILE PHOTO - Volkswagen employees stand next to Volkswagen electric cars during a ceremony at German carmaker Volkswagen's first battery cell production plant 'SalzGiga' in Salzgitter, Germany, July 7, 2022. REUTERS/Fabrizio Bensch

European Union and U.S. officials expect to reach agreement that would grant EU companies, including electric car makers, the same status as U.S. ones in the U.S. market, to avoid what the EU calls discrimination against its producers by the U.S. Inflation Reduction Act.

The EU says that while it allows government tax breaks or subsidies for purchases of U.S. electric cars such as those made by Tesla (TSLA.O), the United States makes such support conditional on the car, or parts of it, being made in the United States.

European Commission Vice President Valdis Dombrovskis, responsible for trade, is holding talks on Thursday and Friday with U.S. Trade Representative Katherine Tai, Commerce Secretary Gina Raimondo and Treasury Secretary Janet Yellen on the issue.

"Last month Tesla model Y was the most sold car in Germany," Dombrovskis told a news briefing.

"That would not have been possible without the un-discriminatory EU subsidy, while EU electric cars do not get a similar subsidy in the U.S., which is discrimination that we want to address," Dombrovskis said.

EU car makers - like Volkswagen - are affected by the U.S. legislation, which covers a host of other products.

He said the problem also concerned a wide range of goods from the "green economy" sector, including batteries, hydrogen, and renewable energy equipment.

"There is a willingness to engage on the U.S. side on this," Dombrovskis said.

"We hope we can resolve these issues before they become disputes," he said, adding talks would focus on whether changes to the status of EU companies could be made through implementation of regulations to the U.S. law, rather than having to send the whole Inflation Reduction Act back to Congress for amendments.

U.S. Trade Representative Katherine Tai, asked if the issue could be resolved, told reporters she expected the EU and U.S. would reach agreement.

"On the strength of the EU-U.S. relationship, I have every confidence we will work through this," she said after a meeting with Dombrovskis.