“Biden’s Ambitious Investment Plans: Success in Attracting Critical Industries and Threatening Europe’s Competitiveness”

With the Inflation Reduction Act (IRA) and the Chips and Science Act, l’administration Biden hoped to attract critical and up-and-coming industries and be less dependent on China. The mission seems successful with $204 billion in investments announced between August 2022 and mid-April, twice as much as in 2021.

The ambition of the Biden administration

The US Congress was particularly active last summer. With world emerging from severe semiconductor shortage, linked to supply chain disruptions, US lawmakers passed the Chips and Science Act. It brings together a fund of 39 billion dollars and tax credits to the tune of 24 billion dollars, to attract semiconductor companies to the territory of Uncle Sam. Even more massive, the Inflation Reduction Act, as its name does not indicate, aims, with 369 billion dollars in tax incentives, to decarbonize the American economy by promoting the installation of companies in the sector.

The Financial Times has compiled data at its disposal to estimate the success, or not, of its two programs in the areas they cover. While the contours to benefit from it are still being published, success would already be there with the 204 billion investment projects announced between August 2022 and April 2023.

This number represents double, in less than a year, that of 2021, when the texts were then drafts. It is also 20 times higher than in 2019. The British daily has identified 4 investment projects in sectors exceeding one billion dollars in 2019. There have been 31 since August 2022. 75 exceed one hundred million dollars, in semiconductors, electric cars, batteries, components to produce renewable energy.

Investments in the United States, a threat to the European Union?

Several companies have very openly declared that their projects are linked to the American effort, one of the most important in recent history. This is the case of Micron, Intel or TSMC with the Chips Act. By attracting battery, electric car or renewable energy companies with the IRA, the United States is also attacking sectors where China has a head start. About a third of the investments come from abroad, mainly from Asia.

If these two vast financing programs delight companies, it is very different from the European Union. Whether at Commission level or at Member States and in particular Francethe IRA is criticized. It raises fears of a flight of companies from the Old Continent to the United States. In response to Washington, a draft regulation, in the form of a Green Pact, is in preparation. Similarly, on the semiconductor side, a European Chips Act should be completed soon.