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Minister says inflation law ‘highly likely’ to violate FTA

The Investor | 30 August 2022

Minister says inflation law ‘highly likely’ to violate FTA

By Byun Hye-jin

South Korean Minister of Trade Industry and Energy Lee Chang-yang said Monday the US Inflation Reduction Act that bans tax benefits for electric vehicles built outside of North America is highly likely to breach the US-Korea FTA and WTO rules.

Asked whether the act violated the US-Korea FTA or WTO rules during a parliamentary committee meeting on trade and industry, Lee said, “It is highly likely to be violating those rules and we will bring a complaint at the WTO if necessary.”

To raise the issue in the international community, South Korea can either file a complaint with respect to the US-Korea FTA or WTO, Lee added. “If we choose a WTO dispute settlement process, South Korea can join hands with Japan and EU countries, who share similar stance on the matter.”

Lee said the situation might change in the US after the midterm election slated for early November, adding that, like Germany and other EU countries, South Korea will continue to reach out to related officials discreetly before voicing out strong concerns.

Trade Minister Ahn Duk-geun also said the act could breach the non-discrimination principle of FTA which requires contracting parties to not treat domestic market actors more favorably than foreign actors.

“This month, we will visit the US and have meetings with US trade representatives, Department of Commerce, the White House and congress members. Since the IRA affects domestic industries spanning EVs, battery, solar energy and renewable energy, we are looking into various channels (to tackle the issue),” Ahn said.

Ahn added that up until now, the ministry has not received any official notification from the US concerning the inflation act.

The National Assembly’s Trade, Industry, Energy, SMEs, and Startups Committee plans to pass a resolution which aims to suggest improved terms for South Korea.

According to industry sources, the US’s EV tax break comes as a move to revive American manufacturing while countering China, the largest supplier of battery minerals.

The US has specified to offer benefits only to carmakers that produce EVs and batteries at factories within North America.

On Aug. 16, President Joe Biden signed the Inflation Reduction Act, a $370 billion climate, tax and health care package, after it passed the US Congress.

 source: The Investor