Speaking at a joint press conference with French President Emmanuel Macron last week, President Biden acknowledged the Inflation Reduction Act may have “glitches” but defended what the White House views as a major achievement. Biden told reporters he makes “no apology” for the green energy subsidies that have irritated European leaders who fear the $430 billion law will treat their companies unfairly. Straight Arrow News contributor Peter Zeihan breaks down Europe’s gripe with Biden’s pro-American act.
Excerpted from Peter’s Dec. 6 “Zeihan on Geopolitics” newsletter:
President Biden is getting into the holiday spirit by slapping a bow and some American Flag wrapping paper on a sweet little surprise for Europe…The Inflation Reduction Act. Inside they’ll find a wide array of pro-American manufacturing programs that are less than favorable for the Europeans.
Europe has enjoyed 75 years of safe and lucrative trade thanks to the guns and butter deal we know as globalization, but the Americans have outgrown that model. They are ready to bring some of their manufacturing home, and not in a small quantity…we’re talking 12 zeros here. This comes at a time when Biden needs some new footing with the organized labor faction and nothing speaks louder than money.
Europe isn’t happy about the American’s leveling out the playing field and WTO action has been threatened, but at the end of the day, the Biden administration is going to get its way.
Get every week’s most important stories in your inbox
Hey, Peter Zion here coming to you from the Front Range foothills outside of Denver. Today, I wanted to talk about a big issue that is making the rounds in Europe, when the Biden ministration repackage some of his green pro American manufacturing programs into the inflation Reduction Act, it really rubs the Europeans the wrong way. Because here we have this massive stimulus program that is specifically designed to restore manufacturing to North America. So foreign companies need not apply. It’s basically just for manufacturing, build out in the United States, for American workers on American soil with American capital, and the European sea, that is a violation of free trade rules. And you can make the argument that there’s a legal case to be had there, they’re starting to threaten WTO action and the Biden administration is like, tough, the Biden ministration is definitely gonna get its way on this a few things to kind of keep in the back of your mind when you’re evaluating things like this. First of all, this is a political project, just like everything else. And the Biden administration sees this as a way of getting its hooks back into the voting faction that we all know is organized labor. Now, organized labor is one of those political factions that is in play between the Republicans and the Democrats right now. So throwing a trillion dollars there away is gonna go a long way. And since this is the future of the Democratic Party that Biden is concerned about, don’t expect him to back down. Second, there’s a broader strategic picture here. Part of the whole idea of the globalized order that the United States created at the end of World War Two was that if you let us write your security policies, visa vie the Soviet Union in the Cold War, then we will use our Navy to guarantee your commerce no matter where it goes. And we will allow you near duty free access into the American market, and you do not have to grant us reciprocal access. And that in many ways, is the economic foundation of the entirety of the European Union. So the Europeans have been thinking this way now since 1945. But the Cold War ended back in 1989. And the Americans have been moving away from it incrementally ever since. Obama was very populous, Trump was more populous Biden was the most populous we have now had three presidents in a row that from a foreign economic point of view, have had exactly the same policy with different levels of attention, and different levels of grammar checking. So if you’re an ideologue stuck on that for a little bit, I’m sure it’s really uncomfortable. But the bottom line is the American political system, no longer subscribes to this guns and butter trade deal that we had that dates back 75 years now. So the Europeans are now having to deal with a more level playing field and they’re finding it very uncomfortable. Third, the Europeans have been doing this a long time. Part of part of the order is that access was only one way. And so the Europeans are among the more subsidized manufacturing sectors in the world, with states stepping in regularly to bail out or reinforce various economic sectors across the entire system. In many ways, what the Biden administration doing right now is what Europe has been doing for 75 years. And so Biden’s general position is you can suck it. And then finally, let’s assume for the moment that the Biden ministration was fine subsidizing European workers in order to service the American market, it wouldn’t work anymore. Anyway. One of the many, many side effects of the Ukraine war is that natural gas flows to Europe had been circumscribed. And eventually, they’re just going to collapse completely. We are already at a point when there are a lot of economic sectors, especially industrial sectors in Europe, that are no longer viable at all. In the case of green tech, the Europeans have stopped processing a lot of the non ferrous materials that are required in order to build the stuff in the first place, whether that is copper, or lithium or whatever. So what the Europeans are really asking for is for the Americans to subsidize European workers who will be using processed materials that they import from China. And let’s just say that there is not a powerful American lobby that wants to subsidize Europe and China at the same time, so it’s not going to happen. Biden’s gonna get his way. Okay, that’s it for me. Until next time,