Seoul to take IRA issue to WTO if diplomatic pressure does not work: industry minister

[Photo by Han Joo-hyung]

South Korea is using all possible diplomatic and trade channels to protest to the exemption of Korean electric vehicles from U.S. tax credit, and if they do not work, it can take actions through the World Trade Organization (WTO), according to Korea’s trade and industry minister.

“The U.S. Inflation Reduction Act has caused concerns (in related industries),” Lee Chang-yang, minister of trade, industry and energy, told lawmakers in plenary session of the National Assembly’s Trade, Industry, Energy, SMEs, and Startups Committee Monday.

Seoul has been lodging protest through various channels.

“As soon as the IRA had been decided, we delivered concerns to the head of the U.S. Trade Representative about possible violation of WTO rules and Korea-U.S. free trade agreement (FTA),” Lee said. The government will continue with protest until it is heard.

“We are sending assistant ministerial level trade official to the U.S. this or next week to directly hear the U.S. opinion,” he said. Trade Minister Ahn Duk-geun will also raise the issue during his trip to the U.S. for a meeting related to the Indo-Pacific Economic Framework (IPEF).

Under the IRA signed by President Joe Biden last week, Hyundai Motor Group’s existing models lose up to $7,500 tax credit to buyers of clean vehicles as the incentive is restricted to cars assembled in the U.S. with parts sourced largely from the U.S.

Under the IRA, only new EVs assembled in North America will be qualified for the credits from 2024. Battery components will also have to be assembled and produced in North America.

Tax grants will be given to only EVs whose at least 50 percent of battery materials and components are produced in North America starting January next year and fully in 2029. Key battery minerals should also be mined and processed in the U.S. or countries with FTAs with the U.S. At least 40 percent of the minerals should fall into the category in 2023 and more than 80 percent by 2027.

Most of materials sourced in batteries made by Korean producers come from China.

[ㄏ Maeil Business Newspaper & mk.co.kr, All rights reserved]