Korea resolution on US EV incentives passes parliament

South Korea’s lawmakers on Thursday passed a resolution to officially express its concerns over the US Inflation Reduction Act (IRA) that removes tax credits for electric vehicles made outside of North America, urging Washington to also allow subsidies for EVs produced in the Asian country.

Lawmakers said the US tax incentive of the IRA should be applied in a way not to violate international trade rules such as the World Trade Organization (WTO) pact and the Free Trade Agreement between the two countries.

“The IRA does not meet the basic principles of the FTA and WTO rules,” National Assembly members stressed in the resolution, approved by 254 parliamentary members out of 261 attending the plenary meeting.

“South Korea is participating in global supply cooperation such as the US-led Indo-Pacific Economic Framework (IPEF) and reaffirmed cooperation at the Korea-US summit in May,” they said. “The implementation of the IRA does not fit the direction of economic and trade cooperation between the two countries.”

Last month, South Korea's trade minister Lee Chang-yang said the government was considering filing a complaint with the WTO over the IRA.

AIMING TO RECEIVE SAME TAX CREDITS

US President Joe Biden last month signed the IRA into law, which includes provisions to provide tax credits on EVs manufactured only in North America, dealing a serious blow to South Korean automakers, especially the country’s top Hyundai Motor Co. and its affiliate Kia Corp. that produces the eco-friendly vehicles such as the IONIQ 5 in Korea and export them to the US.

South Korean lawmakers also demanded the government take active measures to help EVs made in the Asian nation receive the same tax incentives as those for models produced in North America during the process of finalizing and implementing the IRA’s details through negotiations with Washington.

South Korea’s National Security Advisor Kim Sung-han said the US has pledged to look into the potential impact of the IRA on South Korean automakers after a meeting with his US counterpart Jake Sullivan, according to media reports on Thursday.

Seoul also dispatched a delegation composed of senior officials from the trade, finance and foreign ministries to Washington to convey government and industry worries about the law’s implementation, as well as discuss supplementary measures with key authorities such as the US Trade Representative.

Hyundai Motor Group, which announced plans of $10.5 billion investments in the US auto industry by 2025, discussed additional incentives on its planned EV factory in Georgia with the US state government.

Write to Ji-Yeon Sul at sjy@hankyung.com
Jongwoo Cheon edited this article.