Director of National Intelligence's Urgent Visit to the US... Will It Open Talks on the 'Inflation Reduction Act'?

Anduk Geun, Head of the Trade Negotiation Department at the Ministry of Trade, Industry and Energy, is speaking at an emergency trade promotion committee meeting held to discuss countermeasures against the U.S. Inflation Reduction Act (IRA) on the afternoon of the 30th of last month at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. 2022.8.30
Photo by jieunlee@yna.co.kr
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[Asia Economy Sejong=Reporter Lee Jun-hyung] Ahn Deok-geun, head of the Trade Negotiations Office at the Ministry of Trade, Industry and Energy, will visit the United States to respond to the U.S. Inflation Reduction Act (IRA). Attention is focused on whether negotiations between the two countries can open a path regarding the IRA provision that excludes Korean electric vehicles from subsidy eligibility.

According to the Ministry of Trade on the 5th, Director Ahn will visit Washington DC from today until the 7th to discuss matters related to the Inflation Reduction Act. He plans to meet with key figures from the U.S. government and Congress to convey the Korean government's position on the IRA. This marks the second visit by a senior government official to the U.S. in response to the IRA, following the joint government delegation that visited on the 29th of last month.

The Inflation Reduction Act stipulates that only electric vehicles finally assembled in North America, including the U.S., are eligible for subsidies. According to the law, new U.S.-made electric vehicles can receive subsidies of $7,500 (approximately 10 million KRW) per vehicle, whereas Korean electric vehicles, such as those from Hyundai Motor Company, are excluded from subsidy eligibility. The Korea Automobile Manufacturers Association (KAMA) estimates that the IRA will disrupt exports of about 100,000 Korean electric vehicles annually.

Advance of U.S. Visit Schedule

Originally, Director Ahn planned to visit the U.S. on the 8th of this month to attend the Indo-Pacific Economic Framework (IPEF) ministerial meeting. However, with the implementation of the IRA last month and growing concerns from the domestic automotive industry, the visit schedule was moved forward. This indicates the government's urgency.

Director Ahn will first meet with Katherine Tai, U.S. Trade Representative (USTR), who is responsible for the IRA. In addition, he plans to meet with senior U.S. government officials and key members of both the House and Senate to express Korea's concerns regarding the IRA. He also intends to convey to senior U.S. officials the content of the "Resolution Urging U.S. Tax Support for Korean Electric Vehicles Based on the Korea-U.S. Free Trade Agreement (FTA)," which was passed by the National Assembly plenary session on the 1st.

The issue is effectiveness. The IRA was rapidly enacted due to the upcoming U.S. midterm elections in November. The detailed contents of the Inflation Reduction Act were first disclosed at the end of July, and within just one month, it passed both the House and Senate and was signed by President Joe Biden. Given the clear political background behind the Biden administration's implementation of the IRA, there is little room for amending the law within this year to consider Korea's position.

The government is not unaware of this. A senior official from the Ministry of Trade recently stated at a back briefing for reporters, "(The IRA) was enacted abruptly due to the U.S. political schedule," adding, "Since the U.S. government has a specific purpose, it is realistically difficult to expect immediate amendments or relaxations."

Considering WTO Complaint

This is why the government has even taken out the "World Trade Organization (WTO) complaint" card. After reviewing the IRA, the Ministry of Trade believes it is highly likely to violate not only WTO rules but also the Korea-U.S. Free Trade Agreement (FTA). Minister Lee Chang-yang of the Ministry of Trade also stated at the full meeting of the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises Committee on the 22nd of last month, "There are significant concerns about the U.S. Inflation Reduction Act," and "We are actively considering filing a complaint with the WTO."

The government intends to minimize conflicts with the U.S. during the IRA consultation process. A Ministry of Trade official said, "Korea and the U.S. are also seeking cooperation through frameworks such as IPEF to restore regional supply chains and respond to decarbonization," adding, "We will actively respond to trade issues such as the IRA while continuing consultations to develop the bilateral cooperative relationship."