On Thursday, the European Union expressed concern that a new United States tax credit which is aimed at Americans to encourage them to buy electric vehicles. The European Union fears that such encouragement would not only break the rules of the World Trade Organization but also discriminate against the producers in Europe.

The US writes the Inflation Reduction Act

According to the Inflation Reduction Act which is approaching its final approval in the U.S. Congress, to lower the cost of an electric vehicle tax credit can be given up to $7,500. In order for a consumer to qualify for the tax credit, the Inflation Reduction Act states that it is required for the battery of the electric car to have been made within North America using minerals which were either mined or recycled on the North American continent.
Miriam Garcia Ferrer, a spokeswoman for the European Commission, stated that the European Union is deeply concern about the new, potential barrier with regards to the trans-Atlantic trade. She further stated that the European Union believe that the requirements for the electric car tax credit is discriminatory because it discriminates against the foreign producers with regards to the producers in the U.S.

EVs tax credit hurts foreign automakers

The tax credit would remove the eligibility for foreign automakers such as Toyota, Mercedes, and Hyundai. Before the tax credit was proposed, subsidy was available for those who were purchasing foreign cars.
In South Korea, the EV tax credit proposal has raised major concern. After US President Joe Biden’s visit to Seoul, the electric vehicles manufactured by Hyundai in South Korea will not have access to the credits which they were led to believe they would have earlier this year.
The European commissioner for competition, Margrethe Vestager, have said that the tax credit should not be placed against friends as a matter of principle. However, Vestager does not believe that the electric vehicle tax credit should not mean the WTO gets involved. Meanwhile, Bruno Le Marie, the French Minister of Finance, suggested that the European manufacturers could get new subsidies.
The Japanese Trade Minister Yasutoshi Nishimura commented that friendly nations have been working together to make the supply chain stronger. The EV tax credit goes against the work many friendly nations are trying to do today.

Senator argues against labor union requirement

According to the Treasury Secretary Janet Yellen, there have been meetings with various different parties in order to properly draft the tax credit regulations which specify the exact requirements companies need to have in order to qualify for the electric vehicle tax credit.
The electric vehicle tax credit is being created and push because the Democrats wants to make the EV sector grow dramatically in order to serve climate change mitigation goals. President Joe Biden has set the target for half of all new sales of vehicles to be EV vehicles by the beginning of 2030.
Jointly, Biden is creating a “made in America” economic agenda which will see to create more domestic manufacturing in order to support jobs in the U.S. The other purpose of the agenda is to lower China’s dominance in the EV supply chain and across the EV sector.
It was proposed that the EV tax credit have a union-labor-only requirement which was later negotiated out by Senator Joe Manchin (D-WV). Sen. Manchin argued that against further subsidizing EVs and that he would not sign the bill if the U.S.’s energy and transportation system for EVs are dependent on supply chains that are foreign rather than domestic.
The current legislative product has addressed Sen. Manchin’s concerns for beyond the requirement for the final assembly. The current law now have provisions included that is designed to create more domestic production of batteries for EVs by restricting eligibility for the EV tax credit to electric vehicles which has battery products that meet the requirements for both the sourcing and processing of mineral inputs.

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