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The IRA is expected to deal a severe blow to the local carmakers, which rank second in the U.S. EV market share after Tesla. They sell more than 100,000 electric cars there annually. But now, they fear no Americans will buy their EVs anymore without a tax credit amounting to up to $7,500.
Against this backdrop, the Yoon Suk-yeol administration is going all out to deliver the Korean car industry's concerns about the discriminatory nature of the IRA, which makes subsidies available only to purchasers of EVs assembled in North America. The National Assembly passed a resolution demanding equal subsidies for Korean EVs.
Currently, Hyundai and Kia assemble their flagship EV models such as IONIQ 5 and EV6 here in Korea and ship them overseas, including to the U.S. So it is inevitable for them to sustain a huge loss due to the discriminatory measures.
No one is more worried about the U.S. measures than Hyundai Motor Group Chairman Chung Euisun. He was, no doubt, caught off guard when "Uncle Joe" stabbed him in the back.
The U.S. legislation came less than three months after Chung promised Biden, who visited Seoul for a summit with Yoon in late May, that Hyundai will invest $10.5 billion in America. The sum breaks down to $5 billion for robotics and autonomous driving software development and $5.5 billion to build an electric vehicle and EV battery factory in Georgia.
During a meeting with Chung at the Grand Hyatt Hotel in Seoul on May 22, Biden said, "I would like to thank Chairman Chung for choosing America and we will not let you down." However, his gratitude has rung hollow pretty quickly, much to the disappointment of not only Chung but also Korean officials, businesspeople and the public.
Regrettably, the U.S. has responded to Hyundai's huge investment plan with the exclusion of tax incentives for the company's electric cars. Hyundai is calling on the Biden administration to make its Korean-made EVs eligible for tax benefits while seeking to speed up the construction of its EV plant in the U.S.
Washington should not hesitate to give equal treatment to Korean-made EVs. And it needs to approach the issue from a broader perspective in light of the alliance and partnership between the two countries.
During their May summit in Seoul, Biden and Yoon agreed to develop the bilateral alliance into a "global comprehensive strategic alliance" that can go beyond a traditional security alliance and extend to the fields of economy and technology.
Besides Hyundai Motor, major Korean conglomerates such as Samsung and SK announced plans to make huge investments in the U.S. to produce semiconductors and EV batteries. Such investments are crucial to upgrading the Seoul-Washington alliance and partnership as well as reviving the U.S. manufacturing industry and creating its own supply chains.
In this situation, it is not desirable for the IRA's discriminatory provision to get in the way of a better alliance and partnership between South Korea and the U.S. Biden apparently needs such an act to woo more voters ahead of the midterm elections in November and back up his efforts to exclude China from the EV and battery supply chains.
Nevertheless, it is necessary to point out that the exclusion of tax subsidies for EVs assembled outside North America is in clear violation of the Korea-U.S. Free Trade Agreement and World Trade Organization (WTO) rules. It is not fair to discriminate against products in terms of their origin.
That's why Seoul is considering starting a trade dispute settlement procedure with Washington or taking the issue to the WTO. It is also studying ways of making joint efforts with Japan and European countries such as Germany to deal with the U.S.' discriminatory steps.
Most of all, the U.S. is required to promote free and fair trade as well as abide by international trade norms. The Biden administration should not dare return to former President Donald Trump's "America first" agenda.
If Biden's slogan of "Build Back Better" is no different from Trump's "Make America Great Again" and unilateralism, he can neither restore the U.S.' global leadership nor strengthen alliances and partnerships with other countries amid the escalating great power rivalry with China.
The author (byb@koreatimes.co.kr) is the chief editorial writer of The Korea Times.
