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Germany's Habeck optimistic EU and U.S. can reduce trade tension

FILE PHOTO: French Economy and Finance Minister Le Maire and German Economy and Climate Minister Habeck in Paris

By Christian Kraemer and Jeff Mason

WASHINGTON (Reuters) -German Economy Minister Robert Habeck expressed optimism on Monday about resolving a European Union trade dispute with Washington, saying he saw room for compromise on certain elements of the U.S. Inflation Reduction Act and its green subsidies.

Many EU leaders are worried the local content requirements of $369 billion of green subsidies in the U.S. Inflation Reduction Act will encourage companies to relocate, making the United States a leader in green tech at Europe's expense.

"There is still a fair chance to reach agreements that will allow European industry to participate, and not be excluded from, the Inflation Reduction Act," Habeck told reporters after arriving in Washington for meetings with top U.S. officials.

Habeck said the U.S. legislative process was completed, but work was now underway on regulations implementing the law. That process was far advanced, or more or less completed, for the automotive and battery sectors, but was still ongoing for the areas of hydrogen, critical minerals and raw materials.

At the White House, President Joe Biden's top economic adviser Brian Deese told reporters that Europe and other U.S. allies could actually benefit from the U.S. investments planned since they would accelerate reductions in the cost of next-generation technologies that are critical for the world.

"Europe and other allied countries have nothing to fear from the Inflation Reduction Act and quite a bit to gain," he said.

Habeck, who is slated to meet with U.S. Treasury Secretary Janet Yellen on Tuesday along with French Finance Minister Bruno Le Maire, told reporters before leaving for Washington that he was "quite confident" that solutions would be found in coming days and weeks.

Yellen welcomed the meeting with Habeck and Le Maire as part of Washington's "ongoing and sustained engagement" on the Inflation Reduction Act and the European Union's Green Deal Industrial Plan, a Treasury official said.

"We look forward to working with our European allies on accelerating investments in green technologies. The U.S. is committed to partnering with counterparts in Europe and globally on building resilient clean energy supply chains," the official said.

(Reporting by Christian Kraemer, Andrea Shalal and Jeff Mason; Writing by Andrea Shalal and Paul Carrel; Editing by Edwina Gibbs, Leslie Adler and Jonathan Oatis)