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| Deputy Trade Minister Jeong Dae-jin |
The much-contested U.S. Inflation Reduction Act, under which Korean manufacturers of electric vehicles (EVs) and EV batteries will be put at a significant cost disadvantage in the world's largest economy, goes against international trade norms, the trade ministry said Wednesday.
The Biden administration began denying tax credits of up to $7,500 (10 million won) last week to buyers of EVs manufactured outside the country, as stipulated under the act. Laws specific to EV battery manufacturers will take effect in stages over the next few years.
Advancing the stimulus package at the expense of Korea's key manufacturers are the falling approval rating of the U.S. president. He is seeking a dramatic upswing to his dismal polling numbers ahead of the November mid-term elections, mostly through protectionist policies to revitalize the U.S. economy scarred from the years of the COVID-19 pandemic.
Lingering possibility
"We do not go as far as to characterize the act as a violation, but possibilities are there," Deputy Trade Minister Jeong Dae-jin said during a briefing at the Ministry of Trade, Industry and Energy building.
"The primary concern and ultimate goal is to resolve the issue in an effective manner, not amplifying it into a full-blown dispute."
The comment followed a question over whether Korea will be able to gain a meaningful outcome within the desired timeframe if the two countries seek mediation by the World Trade Organization (WTO) over the U.S.' protectionist move.
This was in reference to Trade Minister Lee Chang-yang who said during a National Assembly session Monday that Korea will consider filing a complaint with the international trade body against the U.S.
Jeong said the WTO's involvement should be a last resort, an option to consider only when all other possible measures are exhausted. "We will continue bilateral talks through all possible communication channels, to avoid the WTO or any other third-party engagement. Whether we would take issue from the standpoint of free trade agreement (FTA) violations or WTO obligation breaches will be determined after a thorough review and weighing all relevant critical factors," he said.
The partially effective law signed by U.S. President Joe Biden last week will have far-reaching consequences for Korea's automotive and battery manufacturers unless revised by the U.S. government or its legislative branch, he added.
The unexpected rush by the Biden administration will be measured accordingly by Korean trade authorities' continued efforts to deliver opinions to best protect the interests of the country's key growth driver industries.
"Senior trade ministry officials will meet with their U.S. counterparts before the U.S. Treasury Department finalizes the specifics of the requirements on the raw input materials needed for EVs," Jeong said.
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