The planned U.S. tax incentives for the purchase of electric vehicles have drawn criticism from the European Union and South Korea, which claim they may discriminate against vehicles built abroad and violate WTO regulations.
Congress would lift the threshold on the current $7,500 tax credit for buyers of electric vehicles under the $430 billion climate and energy package that the U.S. Senate approved on Sunday, but there would be restrictions, such as prohibiting vehicles not made in North America from obtaining the credit.
President Joe Biden
After President Joe Biden approves the measure, tax credits for vehicles made outside of North America will no longer be allowed.
The proposed regulation also contains clauses designed to forbid the use of battery parts or essential minerals that come from China.
According to Miriam Garcia Ferrer, a spokeswoman for the European Commission, “We think it’s discriminatory, that it is discriminating against international producers in contrast to U.S. producers.” Naturally, this would imply that it was against WTO regulations.
In a news briefing, Garcia Ferrer stated that the EU concurred with Washington that tax credits are a crucial incentive to boost EV demand, encourage the switch to sustainable transportation, and lower greenhouse gas emissions.
But we must make sure that the new policies are reasonable and… non-discriminatory, she added. Therefore, we keep urging the US to amend the measure to eliminate the discriminatory provisions and bring it into full compliance with WTO regulations.
South Korea – Hyundai Motor Co (005380.KS)
On Thursday, South Korea added that it had warned the United States about the possibility for the bill to contravene WTO regulations and a bilateral free trade agreement. The U.S. trade authorities have been asked to relax the standards for battery components and the final vehicle assembly, according to a statement from South Korea’s trade ministry.
The commerce ministry of South Korea met with the producers of batteries LG Energy Solution, Samsung SDI, and SK as well as the automaker Hyundai Motor Co (005380.KS). In order to avoid being at a competitive disadvantage in the American market as a result of the bill, the corporations requested Seoul’s cooperation, according to the statement.
Using the U.S.-Korea Free Trade Agreement as justification, South Korea’s auto industry organization announced on Friday that it had written to the U.S. House of Representatives asking that the country include EVs and battery components made or assembled in South Korea as eligible for U.S. tax incentives.
The Korea Automobile Manufacturers Association (KAMA) issued a statement saying, “Korea is profoundly worried that the recent U.S. Senate’s EV tax incentive bill includes provisions for granting tax advantages discriminating between North American-made and imported EVs and batteries.” It claimed that South Korea has been providing subsidies for electric vehicles built in the US.
The present legislation substantially restricts EV access and alternatives for Americans, and Hyundai stated that it is “disappointed” because it “may dramatically hinder the shift to sustainable mobility in this market.”
Recently, Hyundai, which imports its top-of-the-line electric vehicles from Korea, announced investments worth $10 billion in the United States, including EV production in Alabama and Georgia.
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