The United States must change EV law

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The United States must change EV law

The governments of Korea and the United States have decided to establish a consultative channel to address U.S. discrimination against Korean electric vehicles (EVs). The Minister for Trade and the U.S. Trade Representative are establishing a process to resolve the dispute related to the Inflation Reduction Act (IRA), which disallows subsidies for Korean-made EVs.

U.S. discrimination against Korean EVs constitutes a clear violation of the Korea-U.S. Free Trade Agreement, which strictly bans unfair treatment of the other on key issues, including the provision of subsidies. Our trade authorities must point out the U.S. violation of the FTA and demand the U.S. government rectify it.

Korea paid a huge social price in the process of negotiating, renegotiating and ratifying the free trade deal. After the liberal Roh Moo-hyun administration started the negotiation in 2006, it took five years and nine months until the pact was finally approved by the National Assembly during the Lee Myung-bak administration.

Due to the vehement opposition to the trade deal by then-opposition Democratic United Party — a predecessor of the current Democratic Party — a hammer and steel pipe appeared in the meetings of related standing committees, not to mention a tear gas canister that exploded during a full meeting of the legislature. The FTA was a painful journey for the Korean economy to transform into an open and free one. Given such a tumultuous history, Korea cannot just sit on its hands over the U.S. violation.

The aftermath could shake the very foundation of the traditional alliance the Yoon Suk-yeol administration has revived. During the Korea-U.S. summit in Seoul in May, the two countries declared that they upgraded the alliance to a global strategic alliance. After Korea joined the U.S.-led Indo-Pacific Economic Framework (IPEF), Korean companies announced their bold plan for large investments in America one after another. In fact, Korea has contributed the most to creating jobs in America — as many as 35,000 so far this year — through their investments in the U.S. We wonder if America really can betray its core ally in a such shameful way.

The Yoon administration must strongly demand the U.S. government do not shake the mutual trust built over the past decades on the occasions of the UN General Assembly Meeting to be held in mid-September and the following trip to Seoul by U.S. Vice President Kamala Harris. If the Yoon administration cannot fix the unfair discrimination this time, similar damage can be expected in other areas, like semiconductors, next time.

Korea also must prepare for prolongation of the crisis given the November mid-term election in America. At the same time, the government must fix the loopholes in our subsidy system for EVs. In the first half, the government offered 44.8 billion won ($32.4 million) in subsidy to American EVs. Other countries adhere to some discriminatory subsidy policy to develop their own EV industry. The time has come for Korea to change the subsidy system within the boundaries of the standards of the World Trade Organization.
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