South Korean and US officials are working on a “concrete proposal” to resolve their differences over electric vehicle subsidies, South Korea’s commerce minister told CNBC.
“We have created a dedicated dialogue channel to address this particular issue, and we are pleased that the US government has sincerely engaged with us to resolve the issues,” Ahn Duk Geun Cheri Kang of CNBC said on Wednesday.
He was referring to concerns about electric car subsidies that would put South Korean automakers at a disadvantage, with some South Korean officials calling the move “betrayal” bilateral trust between the two countries.
$430 billion climate and energy bill, or Inflation Reduction Act (IRA)was signed by President Joe Biden in mid-August.
It includes federal tax credits offering consumers credit of up to $7,500 for those who buy new U.S.-assembled electric vehicles, and those who buy vehicles made by foreign automakers such as Kia and Hyundai will not be eligible.
Hyundai is the second largest seller of electric vehicles in the US after Tesla.
U.S. Vice President Kamala Harris and South Korean President Yoon Suk-yeol met in Seoul to discuss bilateral relations after officials from the two countries began talks on an Inflation Reduction Act, which includes a provision Seoul says could harm automakers in South Korea.
Song Joon Cho | Bloomberg | Getty Images
“We are disappointed that, in particular, this provision [was] included in the IRA without much prior consultation,” Ahn said, adding that the South Korean government is preparing for “every possibility,” including proposing legislative amendments to Washington.
His comment was not as strong as the heated rhetoric from Seoul officials in recent weeks.
On Thursday in Seoul, US Vice President Kamala Harris met with South Korean President Yoon Seok-yeol to discuss the challenges facing South Korean automakers.
BUT White House testimony after a meeting between the two leaders, he said that the US vice president understood the concerns expressed and that both had promised to “continue consultations” on the issue.
Yoon’s office quoted Harris as saying she would “consider ways to alleviate South Korea’s concerns in the law enforcement process,” according to the report. statement at the same meeting.
Violation of WTO rules?
South Korean and European officials have said the IRA’s tax credit provisions are in violation of World Trade Organization rules. This was reported by Reuters.
South Korea’s Industry Ministry confirmed to CNBC that Seoul would consider filing a formal complaint with the WTO over such concerns.
Last week, the Korean Trade Union Confederation, representing workers in South Korean domestic companies including Kia and Hyundai, criticized the US measures as “unilateral” and “focused on the US” and said they could add to the uncertainty surrounding the current state of the global economy.
Ahn noted that South Korea’s export-dependent economy is indeed “experiencing a decoupling phenomenon” as a result of heightened trade tensions between the US and China. He didn’t elaborate further.
He added that South Korea is facing an ongoing trade deficit problem due to rising energy prices, and that Beijing plays a strategically important role for the country.
“China is still [a] a very important trading partner of Korea,” Ahn said.
“I think that the stabilization of these trade relations will play a very important role in securing global supply in these turbulent and uncertain economic conditions.”