Government Expands IRA 'Alliance Front'... Will It Revive South Korea's Electric Vehicle Industry?

Strengthening Cooperation with Germany, UK on IRA... Recent Start of Working-Level Talks
Strategy to Maximize Negotiation Effects with the US... Concerns Also Conveyed to EU Parliament
Signs of IRA Easing in the US... Senate Introduces Suspension Bill

President Biden of the United States Taking Photos with Citizens at the 'Inflation Reduction Act' Legislation Event
(Washington DC, Reuters = Yonhap News) On the 13th of last month (local time), U.S. President Joe Biden is taking photos with citizens at the 'Inflation Reduction Act' (IRA) legislation commemoration event held at the White House in Washington DC. The IRA is a bill signed by President Biden last month to control soaring prices. 2022.9.14
alo95@yna.co.kr
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[Asia Economy Sejong=Reporter Lee Jun-hyung] The government has stepped up cooperation with Germany, the European Union (EU) Parliament, Japan, and others to respond to the Inflation Reduction Act (IRA) proposed by the U.S. Congress.

According to related ministries on the 3rd, the Ministry of Trade, Industry and Energy recently held the '2nd Korea-Germany Industrial Cooperation Dialogue' at the Korea Chamber of Commerce and Industry in Seoul and discussed joint response measures to the IRA with the German Federal Ministry for Economic Affairs and Climate Action. The IRA is a law that stipulates that only electric vehicles finally assembled in North America, including the U.S., can receive subsidies. Korea and Germany are major automobile manufacturing countries with production volumes of 3.46 million and 3.35 million units respectively last year, and both have high export dependence on the U.S. Accordingly, both sides shared difficulties faced by their domestic industries due to the IRA and sought joint response measures.

The Ministry of Trade, Industry and Energy also emphasized the need for cooperation on the IRA in contact with the European Union (EU) Parliament. On the 21st of last month, Deputy Minister for Trade Jeong Dae-jin met with an EU Parliament delegation visiting Korea and conveyed concerns about the Inflation Reduction Act. Deputy Minister Jeong said, “The provisions on tax benefits for electric vehicles in the IRA discriminate between American-made and imported electric vehicles,” adding, “The Korean government and industry are seriously concerned about these provisions, and EU member countries such as Germany and Sweden are likely to share similar concerns.”

Working-level Consultations Initiated with Four Countries... U.S. Also Shows Signs of Easing

The government’s policy is to maximize the effect of negotiations with the U.S. by cooperating with major automobile manufacturing countries such as Germany, the United Kingdom, Japan, and Sweden. Although specific cooperation measures have not yet been decided, it is reported that all five countries reached a consensus during recent working-level consultations that the IRA violates international trade norms such as the World Trade Organization (WTO) Most-Favored-Nation treatment. A Foreign Ministry official said, “We will continue working-level consultations on the IRA with countries holding similar positions such as Europe and Japan,” adding, “We can meet frequently going forward.”

Signs of easing the IRA are also becoming visible within the U.S. Senator Raphael Warnock of Georgia introduced the 'Affordable Electric Vehicle Act for America' on the 29th of last month (local time). This bill includes a provision to postpone the application date of the IRA’s electric vehicle tax benefit conditions from 2022 to December 2025. If the amendment passes, domestic automakers such as Hyundai Motor Company will be relieved of the pressure to accelerate the establishment of production bases in North America. Hyundai is building an electric vehicle factory in Georgia, U.S., aiming to start operations in 2025.

Minister Lee Chang-yang of the Ministry of Trade, Industry and Energy Visits the United States
(Washington=Yonhap News) Special Correspondent Lee Sang-heon = Minister Lee Chang-yang of the Ministry of Trade, Industry and Energy visited Washington DC, USA on the 20th of last month (local time) to discuss resolving the discrimination issue against Korean electric vehicles under the U.S. Inflation Reduction Act (IRA). He is seen interviewing with reporters at the airport. 2022.9.21
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80 Billion Won Spent on Trade Diplomacy with the U.S.... Criticism of 'Delayed Response'

The Korea-U.S. dialogue channel for IRA negotiations has also been fully activated. The Korean delegation, composed of related ministries including the Ministry of Trade, Industry and Energy and the Ministry of Foreign Affairs, held the first working-level meeting related to the IRA with the U.S. Department of State in mid-last month. Additionally, Minister of Trade, Industry and Energy Lee Chang-yang stated at a press briefing held at the Government Complex Sejong on the 26th of last month that he confirmed the U.S. side’s willingness to ease the IRA. Minister Lee said, “I recently met with U.S. Secretary of Commerce Gina Raimondo and confirmed that there is a willingness to resolve the issues raised by Korea,” adding, “Secretary Raimondo also expressed that she would represent Korea’s interests within the White House and the U.S. government.”

However, there are views that the Ministry of Trade, Industry and Energy’s response was insufficient. According to data submitted by the Ministry of Trade, Industry and Energy to the office of Rep. Yoon Kwan-seok of the Democratic Party of Korea, the ministry spent 8.12 billion won on trade diplomacy with the U.S. over the past five years. In particular, the ministry allocated a budget of 1.54 billion won this year for U.S. congressional advisory, Korea-U.S. trade dispute resolution, and legal advice related to the IRA, which was passed this year. However, the ministry failed to grasp related trends until the IRA draft was disclosed on July 27.

The Ministry of Trade, Industry and Energy stated that since the IRA was pursued in secrecy, there were inevitable limitations in tracking its progress. A ministry official explained, “The IRA bill was discussed confidentially, making it difficult to understand the contents in advance,” adding, “Immediately after the bill was disclosed, we continuously monitored the bill’s contents and progress using U.S. advisory firms.”