Korean PM Han says EV tax credits may violate FTA rules

The US Inflation Reduction Act (IRA) appears to have violated the Free Trade Agreement (FTA) between the country and South Korea, Korean Prime Minister Han Duck-soo said at a parliamentary session for diplomacy, security and unification on Sept. 20.

US President Joe Biden in August signed the IRA into law, which includes provisions to offer tax credits for electric vehicles manufactured only in North America. 

As the tax credit will be up to $7,500 per EV unit, it raises concerns that Korean automakers, such as Hyundai Motor Co. and its affiliate Kia Corp., will be seriously hit in the North American market.     

It is the first time that a high-ranking government official of Korea has publicly expressed such concerns.   

Korea is reviewing possible actions such as forming a Korea-US committee for negotiations or filing a complaint with the World Trade Organization (WTO), the prime minister added.

The prime minister also dismissed claims that the IRA was enacted as Korean President Yoon Suk-yeol didn’t meet US Speaker of the House Nancy Pelosi during her visit to Korea last month.

Pelosi came to Korea to discuss the two countries’ strong bond for security, but she met National Assembly’s Secretary General Lee Kwang-Jae and Kim Speaker Jin-pyo as the president was on his summer vacation.    

Han said he spoke to the White House and determined that the claim was baseless, and the IRA was not a big issue at the time of Pelosi’s trip to Korea.

Some opposition party politicians criticized the government for not taking action during the legislative run-up to the passing of the IRA.   

“The legislative process began in July, but the Korean embassy in the US recognized the issue only after the bill was passed,” said Democratic Party lawmaker Min Hong-chul.

The Korean government’s preparedness was not sufficient in terms of diplomacy, but its response is the quickest among the 25 countries that will be impacted by the IRA, Han said.

Write to Bum-Jin Chun at forward@hankyung.com
Jihyun Kim edited this article.