In the margins of a diplomatic trip to Japan, Vice President Kamala Harris met South Korea's prime minister, Han Duck-soo, to answer a quarrel that had grown between two old allies over the economics of the electric car. At issue is a new American climate law, passed in August, whose tax credits reward vehicles assembled in North America and thereby place Korean carmakers at a disadvantage. Washington's answer, for now, is a promise to listen, to keep talking as the law takes shape, and to bring the trade and treasury offices into the matter. Whether that promise becomes a changed rule is a qu
Harris Pledges Consultations with South Korea Over EV Subsidy Concerns Under U.S. Climate Law
A pledge to talk, not a change in policy
Mark
Why does a conversation in Japan between Harris and Korea's prime minister matter?
Mimi
Because the law Seoul is unhappy about treats cars assembled outside North America differently. Hyundai and Kia are exposed, and cars are South Korea's third-largest export.
Mark
What exactly in the law is the problem?
Mimi
Three things: EVs must be assembled in North America to get tax credits, subsidies for other models end, and a percentage of battery minerals must come from the U.S. or a free-trade partner.
Mark
Why do Korean officials use a word as strong as betrayal?
Mimi
Korean companies had already agreed to major U.S. investments and factory building. Officials feel they did their part and then the rules changed.
Luke
I'd flag that the betrayal framing is how Korean officials see it, as reported. The piece doesn't quote an official on the record saying so.
Mark
And what did Harris actually commit to?
Mimi
To understanding the concerns and continuing to consult as the law is implemented. A senior official added that the Trade Representative and Treasury are involved.
Luke
Right, but that is a pledge to consult, not to change anything. Nothing here says the rules will be altered, and the official's remarks are unnamed.
Mark
Is there a bigger strategy at play?
Mimi
Yes. Biden wants closer business with South Korea to boost U.S. manufacturing jobs and to build a united front against China.
Luke
What we don't know is how much Hyundai and Kia would actually lose. The article says Seoul worries about a setback, not that it has measured one.
Il Polso
- South Korean officials feel betrayed after pledging factory investments in the United States, only to find the new climate law favors North American assembly.
- The tax credit rules threaten to squeeze Hyundai and Kia in the largest car market in the world, a blow that reaches far beyond two companies.
- Harris met Prime Minister Han Duck-soo on the sidelines of her Japan visit, promising to understand Seoul's concerns and keep consulting.
- The U.S. Trade Representative and Treasury have been pulled into the effort, but no specific change to the rules has been announced.
- The matter now hangs on whether Washington adjusts how the incentives apply to Hyundai and Kia as the law is implemented.
In the margins of a diplomatic trip to Japan, Vice President Kamala Harris met South Korea's prime minister, Han Duck-soo, to answer a quarrel that had grown between two old allies over the economics of the electric car. At issue is a new American climate law, passed in August, whose tax credits reward vehicles assembled in North America and thereby place Korean carmakers at a disadvantage. Washington's answer, for now, is a promise to listen, to keep talking as the law takes shape, and to bring the trade and treasury offices into the matter. Whether that promise becomes a changed rule is a question the coming months will have to answer.
On Tuesday, in Japan, Vice President Kamala Harris sat down with South Korea's prime minister, Han Duck-soo, and told him Washington would work to ease Seoul's worries about the electric vehicle subsidies in the new climate law. The meeting took place on the sidelines of her trip.
The Inflation Reduction Act, a $430 billion bill enacted in August, carries many of President Biden's priorities, including efforts to fight climate change and make the United States a leader in electric vehicles. But its tax credits require EVs to be assembled in North America, and they end subsidies for other models. South Korean officials had committed to building factories in the United States, so they see these rules as a betrayal.
A White House statement said Harris understood Korean concerns and that both sides would keep consulting as the law is implemented. A senior official added that the U.S. Trade Representative and Treasury are involved, though no specific change to the rules was described.
The stakes are high. Hyundai and its affiliate Kia could be set back in the world's largest consumer market, and cars are South Korea's third-largest export. For now there is a pledge to talk, not a policy change. What comes next is whether Washington adjusts how the incentives apply to the two companies.
On Tuesday, in Japan, U.S. Vice President Kamala Harris sat down with South Korea's prime minister, Han Duck-soo, and told him Washington would work to address Seoul's worries about the electric vehicle subsidies in the country's new climate law. The meeting took place on the sidelines of her visit to Japan.
The law at the center of the discussion is the Inflation Reduction Act, a $430 billion bill enacted in August. It carries a long list of President Joe Biden's priorities, including investments meant to roll back climate change and to make the United States a world leader in the EV market.
The provisions that concern Seoul are specific. To qualify for tax credits, EVs must be assembled in North America. The law also ends subsidies for other EV models. And it requires that a percentage of the critical minerals used in those cars' batteries come from the United States or from an American free-trade partner.
The White House described the meeting in a statement. Harris, it said, underscored that she understood Korean concerns about the Act's tax incentives for electric vehicles, and the two sides pledged to keep consulting as the law is implemented.
A senior Biden administration official offered more detail about what happens inside the U.S. government. Extensive conversations, the official said, have already taken place about how to respond. Harris, the official said, listened very carefully and made clear the administration's commitment to work across the government, naming the U.S. Trade Representative and the Treasury Department, to help address the issue. The official did not describe any specific change to the rules.
The friction is awkward because of the larger strategy behind it. Biden has tried to deepen business ties with South Korea as part of an effort to increase U.S. manufacturing jobs and to build a united front against China, which he views as the country's key ideological and economic competitor. South Korean companies had agreed to make major investments and build factories in the United States. Korean officials, for that reason, see the new requirements as a betrayal.
The stakes for South Korea are concrete. The heavily industrialized country worries the subsidies will set back Hyundai Motor Co and its affiliate Kia Corp in the world's largest consumer market. Cars are South Korea's third-largest export, so a disadvantage in the American market carries weight well beyond two companies.
For now, what exists is a pledge to talk, not a change in policy. The thing to watch is whether the U.S. Trade Representative and the Treasury Department produce any adjustment to how the tax incentives apply to Hyundai and Kia as the law is implemented.
Citazioni salienti
Harris underscored that she understood Korean concerns regarding the Act's tax incentives for electric vehicles, and the two sides pledged to continue to consult as the law is implemented.— White House statement
Harris made clear the commitment to work within the U.S. government, including the Trade Representative and Treasury, to help address the issue.— Senior Biden administration official
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Politics & Governance