The head of the World Trade Organization said the US and its trading partners should try to resolve their disagreement over American subsidies for green energy without resorting to a trade conflict.

“We don’t want a subsidy war,” WTO Director-General Ngozi Okonjo-Iweala told Bloomberg Television on Monday at the United Nations Climate Change Conference. “We don’t want it to degenerate to the lowest common denominator where countries can’t compete because they don’t have the money to give these subsidies.” 

On Friday, the European Union urged the US to amend the tax benefits in the recently-passed Inflation Reduction Act, which Brussels said discriminated against foreign goods in violation of WTO rules. The US measures risk “creating tensions that could lead to reciprocal or retaliatory measures,” the EU said.

“There are subsidies that are helpful towards the reduction of carbon emissions,” Okonjo-Iweala said. “If they do not violate or discriminate against other products then it is fine.”

Speaking to reporters earlier, Okonjo-Iweala did not say whether she thought the US subsidies scheme violated WTO rules but said such measures “should not favor domestic against other like goods and services.”

“We would very much hope that this does not lead to a race to the bottom and we will work with members to avoid that,” she said.