New electric vehicle tax credits raise talk of trade war

Aug 23, 2022, 2:20 AM | Updated: 2:45 pm
FILE - An electric vehicle charges at a shopping center in Emeryville, Calif., Aug. 10, 2022. A new...

FILE - An electric vehicle charges at a shopping center in Emeryville, Calif., Aug. 10, 2022. A new tax credit for U.S. buyers of qualifying electric vehicles made in North America has ignited the specter of a trade war as a domestic imperative of the Biden administration and Democrats collides with the complex realities of globalization. (AP Photo/Godofredo A. Vásquez, File)

(AP Photo/Godofredo A. Vásquez, File)

WASHINGTON (AP) — A new tax credit for U.S. buyers of qualifying electric vehicles made in North America has ignited the specter of a trade war as a domestic imperative of the Biden administration and Democrats collides with the complex realities of globalization.

Democrats included the credit in the expansive climate and health care policy law passed earlier this month as a way to incentivize domestic battery and electric vehicle production. But manufacturers in Europe and South Korea, which sell millions of vehicles in the U.S., have threatened to lodge legal complaints with the World Trade Organization.

Adam Hodge, a spokesman for the U.S. Trade Representative, said the intent of the tax credit is to boost “U.S. EV manufacturing, infrastructure, and innovation that will help us meet our clean energy goals, reduce costs, and create jobs” and “to reduce our dependence on China” for critical materials.

How the Biden administration handles the allegations brought by foreign governments and manufacturers will demonstrate whether the president’s international trade position will mirror the Trump administration’s go-it-alone approach, leaving the World Trade Organization’s dispute resolution process in disarray.

The law includes a tax credit of up to $7,500 that could be used to defray the cost of purchasing an electric vehicle. But to qualify for the full credit, the electric vehicle must contain a battery built in North America with 40% of the metals mined or recycled on the continent. And those rules become more strict over time, such that only a few American manufacturers could produce vehicles that qualify for the credits.

That has caused consternation among U.S. carmakers, who say they have ramped up efforts to bolster their supply chains in order to qualify for the credit.

“We are working overtime to localize our supply chains and ramp up production,” said Chris Smith, chief government affairs officer at Ford in a statement last week.

It also has roiled the framework for dealing with the layered matters of international trade.

Earlier this month, when asked about the tax credit, European Commission spokeswoman Miriam Garcia Ferrer said, “we think that it’s discriminatory, that it’s discriminating against foreign producers in relation to U.S. producers,” calling the credits a “new, potential, trans-Atlantic trade barrier.”

“Of course this would mean that it would be incompatible with the WTO,” she said.

Hildegard Mueller, the head of Germany’s auto lobby group VDA, which represents major manufacturers such as Volkswagen and smaller suppliers, also criticized the measures and has asked the EU to intervene.

“We are critical of the fact that the subsidy is tied to conditions which relate to local value creation and therefore disadvantage products from third countries,” Mueller said. “The European Commission is called upon to clearly advocate for non-discriminatory support here.”

However, the potential for a World Trade Organization complaint highlights the void left in part by the Trump administration, which blew up the WTO’s appeals body when it blocked the approval of new judges to serve on the dispute resolution panel. The panel is supposed to have seven judges. But their ranks have dwindled because the United States — under Presidents George W. Bush, Barack Obama and Trump — has blocked new appointments to protest the way the WTO does business.

The WTO acts as a high court for international trade issues and has 164 member-countries.

Daniel Pruzin, a spokesman for the organization, said it has a policy of “not commenting on matters which are or may be the subject of WTO dispute proceedings,” adding that the WTO has yet to receive communication from any members with an intent to initiate dispute proceedings against the EV tax credit.

Simon Lester, current president of WorldTradeLaw.net, which provides summary and analysis of all WTO reports and arbitrations, said “there are pretty strong claims that various aspects of the statue violate a number of WTO obligations.”

“There are possible defenses the U.S. could raise, but the defenses are somewhat weak,” he said.

Presidents of both parties in the U.S. have expressed deep skepticism of WTO, but Biden administration officials have tried to bolster trade relationships overseas.

One measure of how far the administration will go is whether it will approve new judges. A representative from the White House did not comment on whether the administration intends to approve new judges for the administrative body.

Trade experts are not confident there will be a functioning WTO body in the near future.

“The U.S. has an interest in this situation not to have a ruling against them,” Lester said.

Douglas Holtz-Eakin, president of the conservative-leaning American Action Forum said “there is no question” that provisions in the tax credit plan are discriminatory to foreign manufacturers. Without a resolution to the EV tax credit complaints, he said, “this will lead to some sort of retaliation on large U.S. corporations that do business in Europe.”

He added, “This isn’t even a close call, which means the U.S. doesn’t plan to step up and fix the appeals process anytime soon. On a bipartisan basis, leaders have become disenchanted with the WTO because of its inability to put pressure on China.”

Padideh Ala’i, an American University law professor who specializes in trade, said because the WTO has been unable to rein in China for its trade violations, the adjudicative organization has been seen as ineffective.

“But international rulemaking is important and in the absence of that what are we left with — a nonfunctioning appeals body,” world trade relationships will now be left to bilateral agreements and negotiations between powerful parties and smaller countries.

“We entered into these arrangements so that we can safeguard peace, so now we are going to find out what the alternatives are without a WTO appellate body.”

___

Associated Press reporters Tom Krisher in Detroit, Frank Jordans in Berlin, Lorne Cook in Brussels and Joe McDonald in Beijing contributed to this report.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

FILE - Malaysia Airlines planes taxi at a terminal while taking passengers at Kuala Lumpur Internat...
Associated Press

Malaysia aims to add US flights after safety rating boost

KUALA LUMPUR, Malaysia (AP) — The U.S. Federal Aviation Administration has upgraded Malaysia’s air safety rating to Category 1, allowing the country’s carriers to expand flights to the United States after a three-year hiatus, Transport Minister Wee Ka Siong said Saturday. Wee said the move will bolster tourism and economic growth in Malaysia, which opened […]
1 day ago
FILE - China's ambassador in Geneva ambassador Chen Xu makes a media statement criticising the U.S....
Associated Press

Western push on China, Russia at UN rights body faces test

GENEVA (AP) — Western countries are leading a rare two-pronged push at the U.N.’s main human rights body to better scrutinize the human rights records of two big world powers: China, over allegations of abuses during an anti-extremism campaign in western Xinjiang, and Russia, over its government’s crackdown on dissent and protest against the war […]
1 day ago
Russian President Vladimir Putin joins hands with Moscow-appointed head of Kherson Region Vladimir ...
Associated Press

Russia accused of ‘kidnapping’ head of Ukraine nuclear plant

KYIV, Ukraine (AP) — Ukraine’s nuclear power provider accused Russia on Saturday of “kidnapping” the head of Europe’s largest nuclear power plant, a facility now occupied by Russian troops and located in a region of Ukraine that Russian President Vladimir Putin has moved to annex illegally. Russian forces seized the director-general of the Zaporizhzhia Nuclear […]
1 day ago
Associated Press

Athletics take 5-game losing streak into matchup against the Mariners

Oakland Athletics (56-101, fifth in the AL West) vs. Seattle Mariners (86-70, second in the AL West) Seattle; Saturday, 4:10 p.m. EDT PITCHING PROBABLES: Athletics: JP Sears (6-3, 4.22 ERA, 1.34 WHIP, 45 strikeouts); Mariners: Luis Castillo (7-6, 3.06 ERA, 1.11 WHIP, 159 strikeouts) FANDUEL SPORTSBOOK LINE: Mariners -268, Athletics +218; over/under is 6 1/2 […]
1 day ago
FILE - Latvia's Prime Minister Krisjanis Karins speaks with the media as he arrives for an EU summi...
Associated Press

Latvian leader’s party expected to fare well in election

HELSINKI (AP) — Polling stations opened Saturday in Latvia for a general election influenced by neighboring Russia’s attack on Ukraine, disintegration among the Baltic country’s sizable ethnic-Russian minority and the economy, particularly high energy prices. Several polls showed the center-right New Unity party of Prime Minister Krisjanis Karins emerging as the top vote-getter with up […]
1 day ago
The founder Te-Wang Lin of the Taiwan People Communist Party places a Chinese police hat down on th...
Associated Press

Hong Kong leader promises revival on China’s National Day

BEIJING (AP) — Hong Kong’s leader promised Saturday to revive its struggling economy following a campaign to crush a pro-democracy movement as China’s ruling Communist Party marked its 73rd anniversary in power under strict anti-virus controls. In Beijing, crowds of spectators watched a 96-member honor guard raise the Chinese flag on Tiananmen Square in the […]
1 day ago

Sponsored Articles

Anacortes Christmas Tree...

Come one, come all! Food, Drink, and Coastal Christmas – Anacortes has it all!

Come celebrate Anacortes’ 11th annual Bier on the Pier! Bier on the Pier takes place on October 7th and 8th and features local ciders, food trucks and live music - not to mention the beautiful views of the Guemes Channel and backdrop of downtown Anacortes.
Swedish Cyberknife Treatment...

The revolutionary treatment of Swedish CyberKnife provides better quality of life for majority of patients

There are a wide variety of treatments options available for men with prostate cancer. One of the most technologically advanced treatment options in the Pacific Northwest is Stereotactic Body Radiation Therapy using the CyberKnife platform at Swedish Medical Center.
Work at Zum Services...

Seattle Public Schools announces three-year contract with Zum

Seattle Public Schools just announced a three-year contract with a brand-new company to the Pacific Northwest to assist with their student transportation: Zum.
Swedish Cyberknife 900x506...

June is Men’s Health Month: Here’s Why It’s Important To Speak About Your Health

According to the Centers for Disease Control and Prevention, men in the United States, on average, die five years earlier than women.
...

Anacortes – A Must Visit Summertime Destination

While Anacortes is certainly on the way to the San Juan Islands (SJI), it is not just a destination to get to the ferry… Anacortes is a destination in and of itself!
...

Ready for your 2022 Alaskan Adventure with Celebrity Cruises?

Celebrity Cruises SPONSORED — A round-trip Alaska cruise from Seattle is an amazing treat for you and a loved one. Not only are you able to see and explore some of the most incredible and visually appealing natural sights on the planet, but you’re also able to relax and re-energize while aboard a luxury cruise […]
New electric vehicle tax credits raise talk of trade war