[Inside Chodong] No Effective Response to U.S. IRA... Let's at Least Prepare Well After November

[Image source=Yonhap News]

[Asia Economy Reporter Kiho Sung] The South Korean government is busy responding to the United States' Inflation Reduction Act (IRA). The industry's biggest concern is not only the government's delayed timing but also the fact that there is currently little that can be effectively done.

The South Korean government's response can be divided into three main approaches. First, resolving the issue through bilateral consultations between South Korea and the U.S. Second, pursuing international dispute resolution procedures. The U.S. Inflation Reduction Act potentially violates the World Trade Organization (WTO) rules and the Korea-U.S. Free Trade Agreement (FTA) norms. This is why there are talks of cooperation with countries in similar situations, such as Germany and Japan. However, the industry remains skeptical about these first two approaches, as it is difficult to enforce them with South Korea's diplomatic capabilities.

The U.S. also does not seem to plan to amend the law's direction. On Labor Day, September 5 (local time), President Joe Biden visited Milwaukee, Wisconsin, and emphasized, "Do you know what the representatives of Korean companies told me about why they want to come to the U.S.? It is because we have the safest environment and the best workers in the world." He added, "This is not just talk; it is the reality," and stated, "We are building the future of America, and the future America will use American-made products made by American workers in American factories." Despite the South Korean government's all-out efforts to convey its opinions, President Biden's stance remains unchanged.

The third approach is to amend the law. In particular, detailed guidelines regarding minerals and components for electric vehicle batteries have not yet been established. These are expected to be announced in the form of guidelines within the year. South Korea plans to actively present its opinions here and also propose easing the 'North American final assembly' requirement for electric vehicles.

The problem is that the third method is also unlikely to yield immediate results. Bloomberg recently quoted Brendan Boyle, a Pennsylvania representative on the House Ways and Means Committee from the Democratic Party, saying, "Considering the many other issues we have to handle, will there be a situation where we jump into this issue right before or after the election? If that happens, it would be very surprising."

Currently, no one believes that the Inflation Reduction Act can be repealed through South Korea's diplomatic efforts. Therefore, amending the law is considered the best option. However, a member of the House Ways and Means Committee responsible for U.S. tax law said it would be difficult to amend the related law around the November midterm elections.

From now on, full efforts must be made to prepare responses after the U.S. midterm elections. South Korea has already missed one opportunity. On September 2 (local time), Bloomberg published an article titled "South Korea Feels Betrayed by Biden's Inflation Reduction Act," conveying South Korea's bewildered atmosphere caused by the IRA.

There is an interesting part in the article. Bloomberg reported that it was a mistake that President Yoon Suk-yeol did not meet directly with U.S. House Speaker Nancy Pelosi, who visited South Korea last month. A source told Bloomberg, "If the two had met, it could have been a decisive opportunity to seek changes before the bill passed." It was possible to take preemptive action, but that chance was missed. Especially compared to Japan, which had already secured some exit routes through lobbying during the legislative process, South Korea's delayed response is widely regarded as regrettable. This is why voices are emerging that a diplomatic strategy considering the U.S. political situation after the November midterm elections must be formulated again starting now.

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