The French government has pitched a complete overhaul of the European Union’s approach to boosting its industry, offering a sweeping “Made in Europe” strategy to counter a flood of U.S. subsidies, according to documents seen by POLITICO.
In a letter dated January 9, the French government calls on the EU to accelerate production targets, weaken state aid rules, establish an emergency sovereignty fund and mobilize trade defense instruments — all in reaction to a recent U.S. bill, the Inflation Reduction Act, which included $369 billion in climate-friendly subsidies.
The move follows a pledge earlier this month from French President Emmanuel Macron, in which he jockeyed for the bloc to make progress on a "Made in Europe" strategy. The campaign has become a point of friction within the EU — while numerous countries support France's endeavor in theory, there is little agreement over exactly how to accomplish it.
France also suggests the establishment of an emergency fund, supported by money from the EU’s post-pandemic recovery pot, as well as from REPowerEU — the bloc’s financing framework for diversifying investments away from Russian fossil fuels.
The letter recommends reallocating €365 billion “not yet disbursed as a priority to sectors that are strategic for European industry” and adds that of the €221 billion in loans that remain to be allocated, EU countries “should be able to give priority to strategic European industrial sectors.”
The emergency sovereignty fund should be operational before the end of 2023, the letter says.
The French are cautious, however, to ensure that a new influx of state aid doesn't fracture the EU's vaunted single market. The fear is that loosening state aid rules could offer an advantage to deeper-pocketed countries within the EU. To counteract this, the letter suggests a repeat of SURE, a common debt instrument used at the onset of the pandemic that offered countries favorable loans.
In order to preserve the fairness of competition rules internationally, France’s letter concludes by saying that “the EU's trade strategy should be more articulated around the defense of the European single market.” To this end the Commission should make use of trade defense instruments as outlined in World Trade Organization rules, the letter notes.
Commission President von der Leyen is due on February 1 to offer EU countries her thoughts on responding to the U.S. efforts. Her messaging will come just ahead of an EU leaders’ summit scheduled for February 9-10 in which the issue is due to take center stage.