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Korea, European Union to seek joint response to U.S. Inflation Reduction Act

Published: 25 Aug. 2022, 10:54

U.S. President Joe Biden, right, shakes hands with Hyundai Motor Group Executive Chair Euisun Chung after a speech on the automaker's investment plan in the United States in Seoul on May 22. [YONHAP]

Korea will seek a joint response with the European Union over the U.S. Inflation Reduction Act that excludes electric vehicles (EVs) assembled outside of North America from tax incentives, the Industry Ministry said Thursday.

The law, signed by U.S. President Joe Biden last week, calls for the expansion of tax subsidies for EV purchases, but only for those assembled in North America. It also requires U.S.-made batteries and battery materials in EVs.

Korean carmakers, including Hyundai Motor and Kia, are feared to lose ground in the world's most important auto market due to the law, as they make their flagship models at domestic plants and ship them overseas.

Battery makers here are also heavily dependent on China for their supplies of key minerals for manufacturing.

"Concerns have been shared by some European exporters, including Germany and Sweden. Starting next month, we will have active consultations with the EU and other nations in the same position to explore joint responses," Deputy Trade Minister Jeong Dae-jin told reporters.

The Korea Automobile Manufacturers Association also plans to issue a joint statement over the matter with its European counterpart around next month, according to industry sources.

During a parliamentary session Tuesday, Industry Minister Lee Chang-yang said that the government will actively review whether to bring the case to the World Trade Organization (WTO) for its possible violation of the most-favored-nation treatment principle.

But Jeong made it clear that filing a complaint with the WTO will be "a last resort," vowing to have thorough one-on-one talks with Washington first for the flexible implementation of the law.

Senior Seoul officials were to fly to the U.S. next week, and Trade Minister Ahn Duk-geun plans to meet with U.S. officials for talks on the act during his scheduled trip to Washington next month, according to the ministry.

"We will do everything to reflect our companies' demand to subordinate regulations of the act that the U.S. government is expected to announce within this year," a ministry official said.

Yonhap