RECOMMENDATIONS: Reaction to the US Inflation Reduction Act

The National Convention on the European Union has published its recommendations, which are the outcome of a national discussion on the topic „Reaction to the US Inflation Reduction Act,“ which was attended by representatives of the state administration, both chambers of the Czech Parliament, economic and social partners, together with representatives of European institutions, the US Embassy in the Czech Republic, the non-profit sector and academics.

Four recommendations emerged from the opinions presented and the subsequent discussion.

  1. Given the partial positive results of the EU-US negotiations to date on mitigating the discriminatory trade aspects of the US Inflation Reduction Act (IRA), the EU and the Czech Republic should support the search for mutually acceptable solutions within existing platforms such as the IRA Task Force (focus on negotiating further exemptions from the IRA) or the EU-US Trade and Technology Council (where, in addition to pressing for substantive results in the area of regulatory cooperation and trade facilitation, it is also appropriate to strengthen the transparency of the process).
  2. While one alternative response could be to take legal action at the WTO, even given the limited functionality of the WTO dispute settlement mechanism, the Czech Republic or the EU should avoid this approach and continue to promote open and rules-based trade. The EU should also avoid a subsidy war with the US, avoid a possible escalation of a trade conflict at bilateral or international level, which would only deepen protectionist tendencies, and rather focus on ensuring a level playing field. From a global point of view, closer cooperation with Asian partners with strong automotive industries (e.g. South Korea, Japan), which have similar IRA problems to the EU, is also a desirable response, especially in view of China’s growing role in green technologies and raw material chains.
  3. The response to IRA at European level should be to step up efforts to kick-start domestic low-carbon industries. Rather than new funding, the EU should primarily focus on creating a stable and favourable environment for investment and innovation through legislative and non-legislative means. This means less regulatory and administrative burdens for companies and greater predictability of European legislation.
  4. Based on analysis and discussion with stakeholders, the Czech Republic should define priority emission-free sectors and actively support their development. To ensure the competitiveness of the Czech economy, it will be necessary to make effective use of available financial instruments, to ensure a sufficient number of skilled workers for low-emission sectors now and in the future, and to communicate actively and positively about the opportunities of green transformation for the Czech economy. These messages should be included in a strategy for green transformation, e.g. in the National Energy and Climate Plan.



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