Electric cars and tariffs will be the subject of high level trade talks between the US and the European Union this week.
To the surprise of absolutely no one, trade officials from the United States and the European Union plan to hold high level talks designed to defuse tensions over the tax credits for electric cars contained in the recently passed Inflation Reduction Act. That law says certain things must happen before the buyers of electric cars are eligible for the full $7,500 tax credit.
First, the car must be finally assembled in America. Second, the batteries for it must be manufactured in America using materials sourced within America or one of a select few countries. The overall goal of the IRA is to promote domestic production, but a nation can only do so much to help local industries before its actions become protectionism, which is banned by the various trade agreements the world’s nations have entered into over the years as part of the globalization process.
Believe it or not, nations actually give up a bit of their national sovereignty when they join trade groups like the World Trade Organization, which has the right to overrule any nation’s trade policies that conflict with the provisions of those treaties. That is exactly the message trade officials from the European Union want to impress on their American colleagues — fix this or we will haul you up before the WTO and you won’t like what they have to say.
Trade officials from Japan and South Korea are waiting in the wings to press their own demands on the US. In particular, Hyundai and Kia feel particularly aggrieved, as do the Korean battery manufacturers like LG Energy Solutions and SK Innovation. President Biden’s deputy national security adviser Mike Pyle agreed to launch a task force on the topic during a meeting last week with European Commission president Ursula von der Leyen’s head of cabinet, Bjoern Seibert, according toThe task force is designed to “promote deeper understanding” on the “opportunities and concerns for EU producers,” Watson said, and comes after high-level meetings between Biden administration officials and allied countries angered over the new law.
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