US Electric Vehicle Tax May Break WTO Rules: EU Pipa News

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BRUSSELS –

The European Union expressed concern on Thursday that a new US tax credit plan designed to encourage Americans to buy electric vehicles would discriminate against European manufacturers and violate World Trade Organization rules.

Under the Inflation Reduction Act, which is about to be passed by Congress, a tax credit of up to $7,500 can be granted to reduce the cost of an electric vehicle. To qualify, the bill requires electric vehicles to contain a battery built in North America with minerals mined or recycled on the continent.

“The European Union is deeply concerned about this new potential transatlantic trade barrier,” said Miriam Garcia Ferrer, spokeswoman for the European Commission. “We think it’s discriminatory, that it discriminates against foreign producers against American producers.”

“Of course this would mean it would be incompatible with the WTO,” she said. The commission is the executive branch of the EU and part of its responsibilities is to trade with the outside world on behalf of the bloc’s 27 countries.

The committee agrees that tax cuts are “an important incentive to boost demand for electric vehicles” and ultimately help reduce greenhouse gas emissions. “But we have to make sure that the measures introduced are fair,” the spokeswoman said.

The idea behind the US requirement is to encourage domestic manufacturing and mining, build a robust battery supply chain in North America and reduce the industry’s reliance on overseas supply chains that can be subject to disruption.

The production of lithium and other minerals used to manufacture EV batteries is now dominated by China. The world’s largest producer of cobalt, another component of EV batteries, is the Democratic Republic of the Congo.

But the committee is deeply concerned about the domestic US content and assembly requirements in the tax credit plan, claiming that it only favors certain mineral-rich countries, to the detriment of EU products exported to America.

EU subsidy schemes, the commission said, are available to both domestic and foreign producers.

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