Flagship U.S. legislation to channel $370 billion into green industries must not discriminate against European businesses, German Chancellor Olaf Scholz told an audience of political and business leaders at the World Economic Forum in Davos.

Coming close to accusing Washington directly of protectionism with its Inflation Reduction Act, Scholz said that hindering competition would ultimately harm the fight against climate change by stifling innovation.

Scholz welcomed the U.S. investment in climate mitigation, “but local content requirements for certain products must not result in discrimination against European businesses,” he said, adding that “protectionism hinders competition and innovation and is detrimental to climate change mitigation.”

“We as EU members are talking to our American friends about this,” Scholz said.

The German chancellor also called for European legislation on state aid to be “more agile and flexible.” That’s code for giving national governments more leeway to support their industry with subsidies — something that is normally forbidden by the EU’s single market rules.

Scholz said that the EU is looking into options to improve investment conditions in the bloc, citing the Chips Act, an EU initiative to boost Europe’s semiconductor manufacturing capacity, as a best-practice example.

On Tuesday, von der Leyen said the European Commission will propose a Net-Zero Industry Act that lays out a series of clean tech objectives for 2030 in order to compete with Washington’s massive green subsidy package.