Trade Minister Ahn Duk-geun met with Katherine Tai, U.S. Trade Representative (USTR), on Wednesday in Washington to discuss the Inflation Reduction Act (IRA), which could significantly affect the business prospects of some of Korea’s largest companies.
The two agreed to further discussions on the matter and “committed to open an engagement channel on these issues,” according to a statement from the USTR
No details were provided about the engagement channel.
Under the terms of the IRA, electric vehicles (EV) have to be assembled in the United States to qualify for a $7,500 tax credit, and they must have a certain percentage of critical battery minerals and components from the United States or countries with which the United States has a free trade agreement.
To qualify for the subsidy, a vehicle can have no battery components at all from China from 2024. In 2025, a vehicle can have no critical minerals from China.
The law, which went into effect on Aug. 16, would have a significant impact on Korean auto manufacturers. Hyundai Motor won’t be making EVs in the United States until 2025, while Kia has no plans to manufacture EVs in the United States. Korean-made EVs are also highly dependent on minerals and components from China.
In addition to his meeting with Tai, the trade minister met with Brian Deese, director of the National Economic Council, on Tuesday.
He also met with Debbie Stabenow, a Democratic senator from Michigan, Adrian Smith, a Nebraska Republican congressman, Todd Young, an Indiana Republican senator, and Buddy Carter, a Republican congressman from Georgia.
“They understand the seriousness,” Ahn told reporters on Tuesday in Washington. “I think our biggest achievement so far has been the agreement to quickly solve the issue.”
One possible solution being pursued is a waiver for Hyundai Motor through 2025, allowing its Korean made EVs to be qualified for the subsidy until the company’s Georgia factory is producing domestically-made vehicles.
“There is so much more work that needs to be done between the two counties in high-tech industries,” Ahn said. “As such, we have expressed our objection to the U.S. actions that did not consider the situation of our companies.”
He reiterated Korea’s stance that the subsidies could go against the WTO’s prohibition on discrimination against trade partners.
Changing the law could be a challenge, as the IRA was highly contentious, with all Republicans voting against it and its passage in the Senate possible only with a tie-breaking vote from the vice president.
In its statement, the USTR was noncommittal, only saying that Tai “listened closely” to Korea’s concerns about the IRA.
“We take their concerns seriously as always, and we certainly stand ready for serious consultations,” John Kirby, National Security Council (NSC) coordinator for strategic communications, said.
The Korean trade minister is the United States to attend a two-day Indo Pacific Economic Framework meeting led by Tsai and Gina Raimondo, U.S. commerce secretary. The meeting will be held Thursday and Friday.
Representative from Japan, Australia, New Zealand, Singapore, Thailand, Vietnam, Brunei, Malaysia, the Philippines, Indonesia, India and Fiji will also be attending the meeting.
BY LEE HO-JEONG [firstname.lastname@example.org]