Understanding the Buy American fight

A newsletter from POLITICO that unpacks essential global news, trends, and decisions.

Nov 30, 2022 View in browser   By Ryan Heath Follow Ryan on Twitter | Send tips and insights to rheath@politico.com Happening Today JIANG ZEMIN DEAD AT 96: The former Chinese leader has died of multiple organ failure . He rose to power in the early 1990s in wake of the Tiananmen Square protests, and died as China has been fighting off a wave of protests over its zero-Covid policy. Jiang was a compromise candidate to lead the Chinese Communist Party, brokering differences between hardliners opposed to Tiananmen-style dissent and reformers. He oversaw China's accession to the World Trade Organization and closer ties with the U.S., while himself prohibiting and cracking down on spiritual organizations like Falun Gong . European Council President Charles Michel is in Beijing to meet President Xi Jinping today for three hours of bilateral discussion, per POLITICO's Jakob Hanke. The topics will range from "reciprocity" issues in the economic relationship between the countries to global crises including Covid-19 and Russia's war on Ukraine. After a lunch with Xi, Michel will meet Prime Minister Li Keqiang. Are China's lockdown protests the beginning of the end for Xi-style autocracy? Stuart Lau explains what you need to know about the demonstrations that swept across China in recent days.   GO INSIDE THE MILKEN INSTITUTE FUTURE OF HEALTH SUMMIT: POLITICO is featuring a special edition of our "Future Pulse" newsletter at the 2022 Milken Institute Future of Health Summit from Dec. 6 to 8. The newsletter takes readers inside one of the most influential gatherings of health industry leaders and innovators solving the biggest global health issues to ensure a healthier, more resilient future for all. SUBSCRIBE TODAY TO RECEIVE EXCLUSIVE COVERAGE .     HAPPENING TOMORROW French President Emmanuel Macron arrives in Washington tomorrow in an unusual position: He's here to persuade a second consecutive American president to dial back protectionist policies . For more than a century the free trade message used to flow in the other direction. Joining Macron will be senior ministers including Bruno Le Maire (finance) and Catherine Colonna (foreign affairs). Macron and other European leaders argue that the "made in America" requirements in the Inflation Reduction Act unfairly advantage the U.S. and harm Europe's domestic clean energy industries. The Biden administration sees the law in much broader terms: "It's the most aggressive action on tackling the climate crisis in American history, which will lift up American workers and create good-paying, union jobs across the country," per the White House . President Joe Biden, French President Emmanuel Macron and German Chancellor Olaf Scholz greet each other at the G-20 summit in Indonesia on Nov. 15, 2022. | Kevin Lamarque/Pool via AP REALITY CHECK: MACRON IS TOO LATE The time to lobby about the IRA was last year. And the person to lobby was Sen. Joe Manchin (D-W.Va.). Large American companies and the federal government have sometimes found themselves in a similar situation in Brussels as Macron finds himself now. In those cases, EU antitrust decisions or regulations such as the privacy rules established by the General Data Protection Regulation were greeted with rage and astonishment, often because those companies failed to take the legislative draft process seriously, or engaged too late in the day to effect it. Even if the IRA is protectionist, and possibly illegal under World Trade Organization rules — as the EU claims — it would take years for Brussels to win a ruling on the matter in Geneva. In the meantime, Congress isn't going to bend because an ally brings macaroons to a State Dinner. Equally, the EU has time to adjust. Building out a domestic U.S. supply chain for the critical minerals needed to build EVs will be a slow process. More than 25 percent of America's lithium needs are met through exports, along with 48 percent of its nickel, 76 percent of its cobalt and all its graphite and manganese, per Atlas Public Policy . BIDEN HAS TWO ACES TO PLAY …  CLIMATE: WTO guidance says its " overriding purpose is to help trade flow as freely as possible — so long as there are no undesirable side-effects." EU leaders will have trouble arguing before a WTO panel that the planet's possible destruction is not an "undesirable side-effect" of an auto industry free from EV subsidies. The EU also wants climate action and spends a lot of money delivering it. Indeed, the bloc's Covid recovery plan is a nearly $2 trillion package known as the European Green Deal . The spirit of the EU deal is copy-pasted from Rep. Alexandria Ocasio Cortez (D-N.Y.) and her allies. On Tuesday Al Gore argued European leaders should stop pushing back on the IRA and instead take the same approach and establish green subsidies. POLITICS: Biden passed the IRA with an eye on the 2024 election. And since nearly every EU political leader wants to see Biden reelected, they're likely to suck it up when it comes to Buy American rules for electric vehicles. SO WHAT'S NEXT? U.S. Treasury could finesse its implementation of the IRA so that European companies are given similar exceptions as Canada and Mexico. But the EU doesn't have a trade deal with the U.S., as America's neighbors do. The real landing zone in this week's discussions is not unwinding or softening the IRA. No-one in Paris thinks that is going to happen. For proof, look no further than today's POLITICO Paris Playbook where Macron's D.C. visit appears only from the 17th paragraph onwards. The real action is around whether an informal understanding can be reached on how to avoid a larger tit-for-tat trade war. German Economy Minister Robert Habeck told an industrial conference in Berlin on Tuesday that he did not want the EU to follow Washington down the protectionist path. Yet he outlined a policy that goes quite a bit in that direction, and which France has already given a name: "Buy European." More by Hans von der Burchard . The problem is basic game theory. EU green tech subsidies (such as Germany's $9,000 bonus for electric cars) are open to suppliers from all over the world, whereas Biden's are reserved for tech produced in North America. Unless the EU can convince the U.S. to cooperate, European national governments may decide they have to reserve their subsidies for local producers. Whatever they decide, Europeans have only themselves to blame for their industrial and strategic failings, argues Matthew Karnitschnig . WHERE TO JOIN GLOBAL INSIDER  Was your Thanksgiving travel like Global Insider's? Hit and miss; highs with and some expensive lows? POLITICO invites you to debate the Travel Experience Redefined, Dec 7, 8.30 a.m. ET online or at the Madison Hotel in D.C. Register here . We'll look at how inflation, supply chain bottlenecks and labor shortages are affecting your travel experiences. And we'll address how a recession might shake up the landscape even more. POLITICO will unveil its European POLITICO 28 power list at an annual gala dinner in Brussels, also Dec. 7. European Parliament President Roberta Metsola will be the keynote interview. You can watch online by registering here . GLOBAL RISKS AND TRENDS RUSSIA — GERMAN MINISTER CONFRONTS BERLIN'S RESPONSIBILITY FOR WAR IN UKRAINE: German Justice Minister Marco Buschmann has acknowledged that Berlin bears responsibility for Russia's war on Ukraine: "The decision to pursue Nord Stream 2 following the annexation of Crimea in 2014 was Germany's contribution to the outbreak of the war in Ukraine," Buschmann said at the welcoming address of a G-7 justice ministers meeting in Berlin. Here's the write-up . UNITED STATES — MARRIAGE EQUALITY BILL PASSES SENATE: Washington is one step closer to enshrining the rights of same-sex and interracial couples to marry, after the Senate voted 61-36 in favor , passing the critical 60 vote threshold often used to block initiatives with bipartisan support. The move now allows to Democratic majority in the House of Representatives to pass the law as soon as Dec. 6, with support from up to 47 Republicans , for Biden's signature. The new law will codify rights until now only established by court rulings. Democratic lawmakers were particularly keen to act after Supreme Court Justice Clarence Thomas' concurring opinion in this year's Dobbs case overturning federal abortion rights questioned the Court's previous rulings, including on same-sex marriage. UNITED NATIONS — NEW PUSH AGAINST IRAN: The United States circulated a draft resolution pushing for Iran to be removed from a U.N. women's equality and empowerment body on Dec. 14, designed as punishment for the theocratic regime's policies, Michelle Nichols reported . The draft resolution labels Iran's policies as "flagrantly contrary to the human rights of women and girls and to the mandate of the Commission on the Status of Women." GLOBETROTTERS "FERRARI OF THE DIGITAL WORLD" : That's the goal of Indian billionaire Gautum Adani who is close to launching an app that has airport services at its core (everything from shopping to rides home), and which fans out from there aggregating other services. Several Chinese companies — Alibaba, Tencent and Meituan — have used a similar model to offer shopping, payments, entertainment and social networks in one place (but ran into trouble with Chinese antitrust regulators), while Amazon offers a Western analog. More here . AWARD SEASON GLOBAL LEADERSHIP: The Macron state dinner is not the only game in town Thursday. The U.S. Global Leadership Coalition will honor President George W. Bush and Laura Bush on World Aids Day, for their leadership in launching the President's Emergency Plan for AIDS Relief in 2003. USAID's Samantha Power, Sens. Mitch McConnell (R-Ky.) and Patrick Leahy (D-Vt.) will also receive awards for recognizing their global leadership contributions. DEMOCRACY PROMOTION: The National Democratic Institute will on Dec. 6 hand out its first Madeleine K. Albright Democracy Awards, to Ukraine President Volodymyr Zelenskyy, on behalf of the people of Ukraine; President Zuzana Čaputová of Slovakia, President Maia Sandu of Moldova and Prime Minister Ingrida Simonyte of Lithuania. SAVE THE DATE Transparency International will host its 20th International Anti-Corruption Conference in Washington, D.C., from Dec 6-10, bringing together groups ranging from heads of states and banks to activists from more than 140 countries. MOVES Claire Ainsley is now director of the Progressive Policy Institute Project on Center-Left Renewal, a new U.K.-U.S. partnership looking at how center-left parties can build majorities. She previously was executive director of policy for Keir Starmer, the leader of Britain's Labour opposition party. h/t Daniel Lippman. Thanks to editor Heidi Vogt and producer Carley Welch. SUBSCRIBE to the POLITICO newsletter family: D.C. Playbook | Brussels Playbook | London Playbook | Paris Playbook | Ottawa Playbook | EU Confidential | D.C. Influence | EU Influence | London Influence | Digital Bridge | China Direct | Berlin Bulletin | Living Cities   JOIN NEXT WEDNESDAY FOR A POLITICO DISCUSSION ON THE NEW TRAVEL EXPERIENCE : Americans are now traveling in record numbers — but the travel experience has changed drastically in recent years, not always for the better. What lessons can we learn from the pandemic and different responses around the globe? And in the face of a possible recession, what will help the travel industry remain vibrant and deliver jobs? Join POLITICO on Dec. 7 for "The Travel Experience Redefined" to discuss these questions and more. Breakfast and coffee will be provided. REGISTER HERE .       Follow us on Twitter Ryan Heath @PoliticoRyan   Follow us

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