EU, U.S. Seek to Avert Chip-Subsidy Race, Float Supply Links
(Bloomberg) -- European Union and U.S. officials on Wednesday discussed ways to address the global chip shortage without racing to provide government subsidies while also fostering collaboration among their respective semiconductor industries.
Bolstering the supply chain for chips was a key focus area for EU and U.S. trade and commerce chiefs who gathered in Pittsburgh for the inaugural meeting of the Trade and Technology Council. President Joe Biden and European Commission President Ursula von der Leyen set up the TTC this summer to strengthen cooperation between the sides.
Manufacturers have cut output of goods from autos to appliances because of a worldwide dearth of chips exacerbated by the Covid-19 pandemic. Companies and countries are planning to spend billions of dollars to expand production in the next few years to produce semiconductors locally and minimize reliance on supplies that are currently concentrated in Taiwan -- which China claims as a renegade province.
Both regions want their supplies to be more predictable, especially when it comes to less reliable partners, according to a person familiar with the talks. The allies acknowledged that pushing to do everything alone and having companies shop for subsidies between the U.S. and EU made little sense, with the only beneficiary in that situation being China, the person said.
EU officials told reporters that during the meeting there was a strong repetition of the principle of avoiding a subsidy race on chips.
A spokesperson for the U.S. Commerce Department didn’t immediately reply to a request for comment.
U.S. Commerce Secretary Gina Raimondo is pushing Congress to fund the $52 billion Chips Act, which would free up funding for local semiconductor output. A European Chips Act is also under consideration, and it would provide a framework to avoid a race to national public subsidies fragmenting the single market, EU Internal Market Commissioner Thierry Breton said Sept. 15.
Europe is weighing whether it needs to build more chip plants over worries that Asian and U.S. suppliers might not be reliable. Intel Corp. has been discussing with European governments whether it could get billions of euros in subsidies to build a factory in the region.
During what were described as free-flowing and substantive discussions on Wednesday, participants also floated the idea of whether the EU and U.S. could more closely collaborate in their respective supply chains, an idea known as complementarity, said the person who declined to be identified because the talks were private.
Such a notion would be challenging due to commercial interests on both sides and political sensitivities, particularly in the EU, where France has been pushing for the bloc to be more autonomous.
To be successful, the idea would also require assurances to make sure that, should a crisis hit, needed inputs are made available. The EU wants to ensure that the experience with Covid-19 vaccines -- where the U.S. blocked crucial exports -- isn’t repeated.
“We have agreed to move forward together to have greater transparency in supply chains,” Raimondo said Wednesday, adding this would involve collecting data from industry. Over time, the allies would look to collaborate on research and development for semiconductors, she said.
In a statement issued at the end of the meeting, the EU and the U.S. said they “share the aim of avoiding a subsidy race and the risk of crowding out private investments that would themselves contribute to our security and resilience.”
Although there was no commitment toward complementarity, the fact it was put on the table and discussed is a positive development, the person said.
In the EU, officials and governments have been debating whether the bloc should primarily focus on championing its own industries and setting the terms and conditions for competition, or whether it should advocate open markets and use its regulatory muscle to shape rules and standards with like-minded countries.
That debate is likely to continue in the weeks and months ahead.
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