South Korean and U.S. officials are working toward a “concrete proposal” to resolve their differences over electric vehicle subsidies, South Korea’s trade minister told CNBC.
“We’ve established a specific dialogue channel to address this particular issue, and we are glad that the U.S. government wholeheartedly engaged with us to rectify the problems,” Ahn Duk-geun told CNBC’s Chery Kang on Wednesday.
He was referring to concerns over EV subsidies that would put South Korean automakers at a disadvantage, with some South Korean officials calling the move a “betrayal” of the bilateral trust between the two countries.
The $430 billion climate and energy bill, or the Inflation Reduction Act (IRA), was signed into law by President Joe Biden in mid-August.
It includes federal tax credits offering consumers up to $7,500 in credit for those purchasing new electric vehicles assembled in the U.S. – and those purchasing cars made by foreign carmakers like Kia and Hyundai will not be eligible.
U.S. Vice President Kamala Harris and South Korean President Yoon Suk Yeol met in Seoul to discuss bilateral relations after officials from two countries engaged in talks regarding the Inflation Reduction Act, which includes a provision that Seoul claims could hurt South Korea’s automakers.
SeongJoon Cho | Bloomberg | Getty Images
“We are disappointed to see in particular this provision [was] included in the IRA without much prior consultations,” Ahn said, adding the South Korean government is preparing for “all possibilities,” including proposing legislative amendments to Washington.
His comment were not as strong as the heated rhetoric from Seoul officials in recent weeks.
U.S. Vice President Kamala Harris was in Seoul on Thursday where she met South Korea’s President Yoon Seok-yeol, to discuss the concerns faced by South Korean automakers.
A White House readout following the two leaders’ meeting said the U.S. vice president understood the raised concerns and that both pledged to “continue to consult” on the matter.
Yoon’s office cited Harris as saying she would “look into ways to relieve South Korea’s concerns in the process of enforcing the law,” according to a statement on the same meeting.
South Korean and European officials have said the tax credit provisions in the IRA are a breach of rules under the World Trade Organization, Reuters reported.
South Korea’s industry ministry confirmed with CNBC that Seoul will be reviewing whether to file a formal complaint to the WTO over such concerns.
Last week, the Korean Confederation of Trade Unions, which represents workers from South Korean domestic companies including Kia and Hyundai, slammed the U.S. measures as “unilateral” and “U.S.-centric,” and said they could worsen the uncertainties surrounding the current state of the global economy.
Ahn noted that South Korea’s export-reliant economy is indeed “experiencing the decoupling phenomenon” as a result of heightened U.S.-China trade tensions. He did not elaborate further.
South Korea is facing a continued trade deficit problem due to a rise in energy prices, and that Beijing holds a strategically significant role for the country, he added.
“China is still [a] very important trading partner of Korea,” Ahn said.
“I think the stabilization of this trade relationship will play a very important role to secure the global supply in these turbulent and uncertain economic circumstances.”