[Electric Vehicle Subsidies, Is This Okay?] Urgent Situation... US IRA Response Bill is '0'

National Assembly Faces Challenges in Bill Proposals Due to WTO and FTA
"Proposals Needed to Raise Public Awareness Rather Than Focus on Passage"
"Reform Needed for Agricultural and Zero-Emission Vehicle Distribution Target System"

[Asia Economy Reporter Seong Giho] "A big wave is coming from the United States, but we have no countermeasures. The current situation, where we may have to accept it as is without any response rather than changes in U.S. policy, is even more frightening."

With the Inflation Reduction Act (IRA), aimed at protecting the U.S. domestic automobile industry, set to take effect in January next year, it has been revealed that no related countermeasure bills are currently pending. Although the government delegation raised issues regarding Korean-made electric vehicles with the U.S. and entered into consultations, the prevailing outlook is that finding an early solution will not be easy. The industry points out that since protectionist trade policies are expanding globally, it is urgent to establish related laws and systems based on the principle of mutual benefit.

According to the National Assembly Legislative Information System on the 2nd, a total of 33 bills proposing amendments to the "Air Quality Preservation Act," which provides the legal basis for subsidies for eco-friendly vehicles (hybrid, electric, plug-in hybrid, hydrogen electric vehicles), have been submitted during the 21st National Assembly. However, none of these bills aim to protect our industry. Along with the Air Quality Preservation Act, bills related to eco-friendly vehicle subsidies include amendments to the Freight Motor Vehicle Transport Business Act, Passenger Motor Vehicle Transport Business Act, and Motor Vehicle Management Act. There are 29, 43, and 73 bills submitted respectively. Among these, no bill benefits our companies specifically.

This is why criticism arises that our subsidies are helping the growth of foreign companies' electric vehicles. According to the Ministry of Land, Infrastructure and Transport, 436 Chinese-made electric buses were sold in the first half of this year, accounting for 48.7% of total sales. However, due to the non-discriminatory subsidy policy, they were able to receive a total of 79 billion KRW in subsidies. This has led to criticism that our taxes are being used to nurture Chinese industries.

At the National Assembly level, three resolutions related to the U.S. Inflation Reduction Act have been proposed and passed with alternative reflections: ▲Resolution urging the prohibition of discriminatory tax support against imported electric vehicles and batteries from the U.S. (by Lee Won-wook, Democratic Party) ▲Resolution urging non-discriminatory tax support for Korean-made electric vehicles and batteries under the U.S. Inflation Reduction Act (Chairman of the Industry, Trade, and Small and Medium Business Committee) ▲Resolution urging U.S. tax support for Korean-made electric vehicles based on the Korea-U.S. Free Trade Agreement (Chairman of the Foreign Affairs and Unification Committee). However, the industry points out that all of these are resolutions without special legal binding force, so it is difficult to expect significant effects.

The industry appeals for direct legislation that can help our companies, but the political circle holds the view that it is difficult to create laws targeting only our companies. A staff member from an opposition party lawmaker’s office explained, "Because of potential violations of the World Trade Organization (WTO) and Free Trade Agreement (FTA) agreements, it is difficult to create laws that benefit only our companies," adding, "That is why resolutions were passed first."

The industry argues that bill proposals should be considered even as a form of pressure. An industry official said, "Passing a bill is meaningful, but even having related content pending conveys the serious domestic situation to the U.S.," and added, "Our government and National Assembly also need to review various bills as a form of pressure."

Voices are being raised that the "Zero-Emission Vehicle Supply Target System," currently enforced through administrative regulations, needs to be revised into a law. This system requires companies manufacturing or selling automobiles or importers to sell a certain percentage of electric vehicles out of their total sales volume. If the target is not met, they must pay a penalty in the form of a contribution. Globally, this system is only implemented in some U.S. states such as California and in China. Because of this, concerns arise that foreign-invested companies like Renault Korea and Korea GM might import foreign electric vehicles to avoid penalties.

Jung Manki, president of the Korea Automobile Manufacturers Association, said, "The importance of the environment can never be overstated," but also pointed out, "If such systems ultimately encourage electric vehicle imports and shake the foundation of our industry, they should be abolished."