Caught between US, EU and China, UK isolated in subsidy battle

    British Prime Minister Rishi Sunak in Washington on June 8 after his meeting with US President Joe Biden.

    If the European Union (EU) feels caught between the United States and China, what about the United Kingdom after Brexit? Now far from the three major world trading blocs, the country is struggling to find its way in the great global battle for subsidies, suddenly accelerated since August 2022 by the Inflation Reduction Act (IRA) of American President Joe Biden.

    “The global race for the industries of the future has been increased tenfold by Biden, explained in March to FinancialTimes Ed Miliband, Labor MP, in charge of the opposition party’s industrial strategy. The European Union has a response, China has done a lot for fifteen years. And the UK? Runners race around the track and Britain can’t tie his shoelaces, while shouting to the side that he doesn’t like the rules. »

    Rishi Sunak learned this the hard way Thursday, June 8, when he met Mr. Biden at the White House. The British Prime Minister was received with diplomacy, and managed to save face by signing a trade agreement in principle on a few key areas, but it was a bare minimum. The hopes of a great free trade agreement, dreamed of by Brexit supporters, are buried. Instead, the UK should get – details to be finalized – that the “critical raw materials” produced or refined in the country can benefit from American subsidies.

    Read also: Rishi Sunak and Joe Biden celebrate restored ‘special relationship’ with broad economic partnership

    The IRA, which amounts to 370 billion dollars (340 billion euros) over ten years, plans to pay aid only to companies established in the United States, in particular for the construction of electric cars. But if certain components come from abroad – for example “critical raw materials” used in batteries – exemptions are possible. Japan was the first to get it. The UK is following suit, while negotiations are ongoing with the EU for the same. The problem is that there is almost no polished critical raw material in the UK and the reach of the deal is weak.

    “It was the best the UK could hope for, points out Sam Lowe, trade specialist at consultancy Flint Global. Not that the United States is particularly angry with the United Kingdom, but they do not want to make free trade agreements today and prefer to concentrate on the development of their own industry. »

    Between two mastodons

    In addition to 369 billion dollars in subsidies from the IRA, the United States passed a law on infrastructures and another on microprocessors. A total of $2 trillion in additional government spending is expected over a decade, according to calculations by McKinsey.

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