Biden Says FTA Restriction for Critical Minerals in IRA a Glitch

President Joe Biden, at a joint press conference with French President Emmanuel Macron, called the language on critical mineral sourcing in the Inflation Reduction Act a glitch, and said the U.S. can tweak the IRA in ways "that can fundamentally make it easier for European countries to participate, and/or be on their own."

Biden pointed to the language that specifies that in order to qualify for $3,500 in tax credits for a new EV purchase, 40% of the value of critical minerals in its battery would need to be domestic or mined or processed in countries with which the U.S. has a free trade agreement. The percentage rises yearly, reaching 80% in 2027.

It's not just Europe that is troubled by the subsidy restrictions. Japan, for instance, has a mini-deal with the U.S. but not a full FTA. In comments to the Treasury, Panasonic North America, the largest producer of EV batteries in North America, said that if Japan was not included for critical mineral processing or battery components, that would limit Panasonic's ability to scale up its local manufacturing.

Biden said the FTA language was a late addition, and he spoke to the senator who asked for it. "He just meant allies, he didn't mean literally a free trade agreement," Biden said Dec. 1. "It was never intended when I wrote the legislation ... to exclude folks who are cooperating with us."

In Macron's opening remarks, as reported through an interpreter, he said that France did not come to Washington asking for an exemption to the bill's language, but to discuss the consequences of the legislation.

"Projects that were being developed in Europe, there’s such a difference in subsidies that these projects might come to an end," he said, and added that a number of senators told him that was "certainly not their intention."

Macron said his discussion with Biden, which he described as "extremely clear" and "excellent," resulted in an agreement to work on the technical elements of the legislation "to make sure there is no domino effect on ongoing projects in Europe."

Biden also said during the press conference, "We’re going to continue to create manufacturing jobs in America, but not at the expense of Europe.”

A day earlier, Macron had said in French at a speech to French diplomats and expats that the choices the U.S. made in writing the CHIPS Act and the IRA "fragment the West."

He also said that the U.S. thinks of domestic concerns first -- which is natural -- and then looks at its rivalry with China, and that Europe, and therefore France, are secondary.

In the Q&A at the press conference, a French reporter quoted Macron's conversation with members of Congress on Nov. 30, when he told them, "“This is super aggressive for our business people. You will perhaps fix your issue, but you will increase my problem.” She then asked if he was reassured that the massive interventions would not damage European efforts to build its green energy industries.

"We want to succeed together, not one against the other," Macron replied. "This is the outcome of our discussions this morning."