U.S. business partners at war over electric vehicle tax credits at Manchin-Schumer

JU.S. trading partners, enraged by recently reformed electric vehicle tax credits that favor North American products, are pressuring Washington to change course on a policy they say could violate international trade laws.

Officials in Europe and Asia representing major auto manufacturing industries have come out strongly against the subsidy, which Democrats bolstered in August with their Green Energy and Health Care Spending Bill, the reduction in inflation. Some are also taking the matter to the World Trade Organization and introducing counter-subsidies as they pressure the Biden administration not to implement something that puts the poor at a disadvantage. products from their country.

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Under the new law, the amended tax credit can now only be applied to vehicles whose final assembly is in North America, a condition designed to favor domestic and continental manufacturers and bring production back to the United States. United.

In doing so, the credit removes eligibility for common brands from foreign automakers like Hyundai, Toyota and Mercedes, where the previous subsidy might have been available for such purchases. Critics say it violates WTO rules governing trade practices, which the international body says are “dedicated to open, fair and undistorted competition”.

The European Union, which has been investigating whether the discounted EV credit violates WTO rules, intends to raise the issue at a December meeting of the US-EU Joint Council on Trade and technology, the FinancialTimes reported Sunday.

President Joe Biden and EU leaders launched the council in June 2021, agreeing to “embrace a green transition” and endorsing “an open global market based on fair competition”.

The subsidy for electric vehicles as it currently stands is “discriminatory” against European carmakers, said Margrethe Vestager, European Commissioner for Competition.

“As a matter of principle, you shouldn’t pit this against friends,” Vestager said. “You have what we consider to be an unbalanced subsidy.”

Involving the WTO is not the preferred option, Vestager said, while French Finance Minister Bruno Le Maire suggested that new subsidies for European manufacturers might be in order.

“We have to play by the same rules if we want to defend our industries, our jobs and our technology,” Le Maire said.

Officials in Japan, where Nissan and Toyota are located, and South Korea, where Kia and Hyundai are headquartered, have also criticized the electric vehicle rules on the same grounds.

The Nissan Leaf is the only electric model from an Asian manufacturer that currently meets assembly requirements under EV credit eligibility rules, according to a list curated and released by the Treasury Department in August.

“Friendly nations are working together to strengthen supply chains as we speak,” Japan’s trade minister Yasutoshi Nishimura said recently. The subsidy for electric vehicles “goes against this overall strategy”.

Biden administration officials have said they are talking to other governments about their appropriations concerns, and Biden himself has assured South Korea that his administration will continue discussions on the issue, officials say. South Koreans.

“We’re meeting with a lot of different parties because we have to write regulations — they’re tax credits — that spell out exactly what companies have to do to qualify for them,” Treasury Secretary Janet Yellen said. FinancialTimes.

The Washington Examiner has contacted the Treasury for further comment.

Democrats want to enable dramatic growth in the electric vehicle sector to serve climate change mitigation goals. Biden has set an electric vehicle adoption target of electric models accounting for half of all new sales by 2030.

At the same time, Biden’s “made in America” ​​economic agenda aims to increase domestic manufacturing to support American jobs and ease Chinese dominance in all sectors, including the electric vehicle supply chain.

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Sen. Joe Manchin (D-WV), who negotiated the electric vehicle provisions to exclude an earlier requirement proposed by unions just for the tax credit, had publicly criticized the prospect of further subsidizing electric vehicles for months as negotiations on the Democratic bill shook. out. He pledged in April not to “register [to transform] our energy and transportation system around electric vehicles that must rely on foreign supply chains.”

The final legislative product addressed his concerns beyond the final assembly requirement. The act now includes provisions to facilitate greater domestic production of EV battery inputs by limiting credit eligibility to vehicles whose battery products meet strict input sourcing and processing requirements minerals.

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