Joe Biden’s Quiet Feud with America’s Allies

By Jim Geraghty

Thursday, January 26, 2023

 

When you’re a Democratic president, you can antagonize European allies, and most of the U.S. media will yawn.

 

Most European leaders disliked Donald Trump for a host of reasons, but particularly because of the Trump administration’s tariffs, protectionist philosophy, and overall hostility to existing trade agreements. Joe Biden arrived in the Oval Office, strutted around the stage, assured our allies that “America is back” . . . and then kept a lot of Trump’s tariffs in place. In the end, Biden is just about as protectionist as Trump was, he’s just more polite about it. The pro-free-trade Cato Institute has called Biden’s policies, “Trumpism with a Human Face.”

 

There’s a more-than-fair argument to be made about tariffs and sanctions against geopolitical rivals such as China. But you would figure that if there were any countries the U.S. would be comfortable trading with, they would be European NATO allies such as the United Kingdom, France, and Germany, or even our neighbors to the north, Canada. Those countries are not known for infamous sweatshops or worker exploitation or negligent environmental rules.

 

Cato notes that the Biden team has been dragging its feet on a free-trade agreement with the United Kingdom:

 

For example, recent trade discussions with the United Kingdom produced pious generalities about the importance of “worker-centric trade” and “work[ing] to develop more durable and inclusive trade policies that demonstrate that trade can be a force for good and create more opportunities for people and gender equity” (to quote from the joint statement issued after the meeting), but nothing about abolishing government-created obstacles to trade.

 

And Inu Manak and Scott Lincicome noted that the so-called “rollback” of Trump-era tariffs on European steel and aluminum “merely replaces the tariffs with a different, more opaque and distortionary system of restrictions” and establishes “separate quotas for 54 different steel product categories, 16 different aluminum product categories, on each of the 27 EU member states, based on its historical exports of those goods to the United States.” I guess if you make a trade agreement complicated enough, no one can understand it, and thus the Biden administration can fool people into thinking that it’s rolling back Trump’s policies.

 

Biden loves everything “made in America,” and the unspoken part of that is “not imported from anywhere else.” But the U.S. imports hundreds of billions of dollars worth of goods and services each month. Using figures from 2019 — a pre-pandemic or “normal” year — the U.S. imported $2.5 trillion in goods in 2019, according to the Office of the U.S. Trade Representative. Yes, China was top of the list at $452 billion, but the next four were Mexico ($358 billion), Canada ($319 billion), Japan ($144 billion), and Germany ($128 billion), and U.S. goods imports from the European Union added up to $515 billion.

 

Our allies don’t like being treated as if they’re some sort of economic threat or menace, and they can sense the unspoken but obvious assertion that their exports to us are some sort of problem to be solved.

 

But what’s really infuriating the capitals of our allies is the so-called Inflation Reduction Act. Last week at the Davos Conference, Al Gore said that the law was “primarily a climate act, $369 billion, which will actually be much larger than that, because the heavy lifting is done by tax credits that are very long-term, some of them actually open-ended.”

 

In other words, Biden and congressional Democrats said, “Come build green-energy materials here in America, and we’ll give you just about every tax break and subsidy imaginable.”

 

But the law wasn’t exactly chock full of details about who qualifies for those subsidies and tax breaks and what companies need to do to fully qualify. Do green-energy companies need to base their projects on U.S. soil? Do they need to use American-made equipment?

 

Back in December, the Wall Street Journal reported:

 

“I’ve been practicing law for 26 years and I’ve never seen a bill that was so vague,” said David Burton, a tax partner at Norton Rose Fulbright.

 

The official estimate for the value of the climate and energy package signed into law this year is $369 billion, but much of the spending isn’t capped and some analysts say the total will be higher. Credit Suisse estimated in September that it could exceed $800 billion.

 

Our allies don’t see this gargantuan bundle of tax breaks as a noble, committed demonstration of the importance of saving the planet. They see it as an underhanded effort to get green-energy companies to base projects, production facilities, and jobs in the U.S. instead of in Europe, Canada, or elsewhere.

 

Back in December, the Washington Post reported that European Union diplomats were tossing around the term “trade war”:

 

In Brussels, the de facto E.U. capital, diplomats are assessing different points of leverage, including potentially using the Biden administration’s desire to coordinate on China strategy, to press their points. “When you want to talk China, you also need to talk IRA,” said one senior E.U. diplomat, who like others interviewed spoke on the condition of anonymity because of the sensitivity of the matter. . . .

 

There has also been talk in Brussels of raising the issue at the World Trade Organization. While few have the appetite for a trade war, some feel such an extreme recourse may be necessary if the U.S. side presses ahead.

 

If Biden’s last name were “Trump,” you would be seeing a lot more headlines about how the arrogant, unilateralist president was needlessly provoking and alienating our closest allies over his own extreme ideological agenda. But this is just good old Joe Biden, so apparently everybody’s just cool with it.

 

This fight isn’t going away. The Journal reports this morning:

 

On Wednesday, Margrethe Vestager, the European Union’s competition chief, called the new incentives from the U.S. toxic and said they contain what she called questionable provisions that run the risk of diluting the shared sense of purpose on tackling climate change.

 

The shifting investment landscape has prompted a backlash in Europe, Asia and Canada, with some governments exploring policies to keep green investment at home. Politicians and companies like South Korea’s Hyundai Motor Co. argue some of the incentives are unfair for favoring manufacturers that produce in the U.S., and are lobbying for the rules to be interpreted in ways that would get them a bigger chunk of support.

 

And we should probably pause to note that a lot of those much-touted green-energy projects never get completed, or quickly go under. (Hey, remember Solyndra? Remember when Terry McAuliffe’s “GreenTech” was going to open up an electric-car-manufacturing plant in Virginia? Good times, good times.*) The usual problems of red tape, zoning approval, lawsuits, funding drying up, etc. can befall trendy green-energy projects as much as any other business or development.

 

Sure, environmentally friendly ways of generating electricity are popular now; just about every other commercial features stock footage of solar panels and wind turbines. But the Journal reported a few days ago:

 

Despite billions of dollars in federal tax credits up for grabs and investors eager to fund clean energy projects, the pace of development has ground to a crawl and many renewables plans face an uncertain path to completion. Supply-chain snags, long waits to connect to the grid and challenging regulatory and political environments across the country are contributing to the slowdown, analysts and companies say. . . .

 

Just 23 percent of the power-generation projects seeking grid connection from 2000 to 2016 were ultimately built. Completion rates were even lower for wind, at 20 percent, and solar, at 16 percent. Around 19 gigawatts of wind and more than 60 gigawatts of solar were withdrawn from interconnection processes in 2020 and 2021, according to the national lab.

 

Maybe the massive tax credits in the Inflation Reduction Act really will turn the U.S. into a thriving, prosperous clean-energy powerhouse. Or maybe America just bought itself a whole bunch of new Solyndras.

 

*That 2013 NR article at the link includes this conclusion:

 

According to Senator Chuck Grassley, a senior career employee at DHS wrote in response to a question from the press office about whether Greentech had received special treatment:

 

We absolutely gave special treatment to Green Tech at the directive of D1. D1 was working directly with the R[egional] C[enter]’s atty. . . . Additionally, I would call a wholesale rewrite of the AAO’s decision by the front office special treatment.

 

“D1″ is an apparent reference to Alejandro Mayorkas, director of DHS’s Citizenship and Immigration Services.

 

Hey, that Mayorkas character sounds pretty shady! Whatever happened to him?