Biden Emphasizes "Electric Vehicle Production in the U.S." Again... What About the Inflation Reduction Act's 'Korean Car' Discrimination?

[Image source=AP Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] As resolving the disadvantages faced by Korean electric vehicles under the U.S. Inflation Reduction Act (IRA) has emerged as a major issue between South Korea and the United States, U.S. President Joe Biden has once again emphasized the domestic production of electric vehicles in the U.S. Concerns are mounting that it will not be easy to quickly resolve the discrimination issue where Korean-made electric vehicles are excluded from the U.S. government's electric vehicle subsidy program.

On the 1st (local time), President Biden issued a statement saying, "Today’s announcement from Micron is another big win for America." This followed Micron Technology’s announcement of a $15 billion (approximately 20.37 trillion KRW) investment over 10 years at a new memory semiconductor plant in Idaho, USA. This investment is expected to create 17,000 jobs by the end of 2032.

President Biden emphasized, "Just this week, we have witnessed major announcements from First Solar, Toyota, Honda, and Corning regarding new investments and jobs as a direct result of my economic plan." First Solar revealed a $1.2 billion investment plan including the establishment of a new factory in the southeastern U.S. Corning announced the construction of a new optical fiber production facility in Arizona and a partnership with AT&T.

These remarks highlight that President Biden is emphasizing multiple achievements centered on manufacturing sector investments shortly after signing the Chips and Science Act (CSA), which provides large subsidies to domestic semiconductor manufacturers, and the Inflation Reduction Act, which allocates substantial funds for climate response. He stated, "We will make electric vehicles, semiconductors, optical fibers, and other key components in America" and "we will build the economy from the bottom up."

However, as President Biden reaffirmed his commitment to producing key products domestically, concerns continue that the so-called 'IRA legislative shock,' which excludes Korean-made electric vehicles from subsidy eligibility, will be difficult to resolve in the short term.

The U.S. Inflation Reduction Act includes a provision offering up to $7,500 in tax credits to electric vehicle buyers. However, the benefit is limited to consumers purchasing electric vehicles that are finally assembled in North America, excluding electric vehicles currently manufactured in South Korea by Hyundai Motor Group and exported to the U.S. The Korea Automobile Manufacturers Association estimates that this will disrupt the export of approximately 100,000 electric vehicles annually.

The South Korean government views this discrimination as highly likely to violate the principles of national treatment and most-favored-nation treatment under the Korea-U.S. Free Trade Agreement (FTA) and the World Trade Organization (WTO). National treatment requires that imported products be treated equally to domestic products, and most-favored-nation treatment mandates that no less favorable treatment be given than that accorded to other countries?both fundamental principles of the international trade system.

In response, South Korea recently sent a parliamentary delegation and a joint government delegation to the U.S. to meet with the U.S. government and Congress. Soon, Trade Negotiations Director Andeok Geun and Minister of Trade, Industry and Energy Lee Chang-yang are also scheduled to visit Washington D.C. At the Korea-U.S. Security Directors’ meeting held in Hawaii the day before, Kim Sung-han, National Security Office Director of the Presidential Office, raised this issue with Jake Sullivan, White House National Security Advisor. The U.S. side has also agreed to review the matter at the NSC level. There is also a possibility that the South Korean and U.S. leaders will directly discuss this issue at the upcoming United Nations General Assembly, which President Yoon Suk-yeol is expected to attend.

The government currently holds the position that the law should be amended or relief measures provided so that Korean companies are not disadvantaged. However, there are views that it will be difficult to reflect these changes since the law has already come into effect. The U.S. midterm elections are scheduled for November. Given the upcoming elections, it is expected that President Biden will find it difficult to officially propose amendments to the Inflation Reduction Act, which could relatively reduce U.S. benefits. If the newly reconvened U.S. Congress, which resumed sessions from today after recess, fails to achieve early resolution of the discrimination issue, the situation is likely to be prolonged.

This content was produced with the assistance of AI translation services.