BRUSSELS: The European Union on Thursday expressed concern that a new US tax credit scheme encouraging Americans to buy electric vehicles would discriminate against European producers and break WTO rules.
Closer to final approval in the US Congress under the Inflation Reduction Act, a tax credit of up to $7,500 may be granted to reduce the cost of an electric vehicle. To qualify, the bill requires that electric vehicles must have batteries manufactured in North America in which minerals have been mined or recycled on the continent.
“The European Union is deeply concerned by this new, potential, trans-Atlantic trade barrier,” European Commission spokeswoman Miriam Garcia Ferrer said. “We think that it’s discriminatory and discriminating against foreign producers about U.S. producers.”
“Of course, this would mean that it would be incompatible with the WTO,” she said. The commission is the EU’s executive branch, and part of its responsibilities is to conduct trade with the outside world on behalf of the bloc’s 27 nations.
The commission agrees that tax credits are “an important incentive to drive the demand for electric vehicles” and ultimately to help reduce greenhouse gas emissions. “But we need to ensure that the measures introduced are fair,” the spokeswoman said.
The idea behind the U.S. requirement is to encourage domestic manufacturing and mining, build a robust battery supply chain in North America and lessen the industry’s dependence on overseas supply chains that could be subject to disruptions.
China now dominates the production of lithium and other minerals used to produce EV batteries. The world’s leading producer of cobalt, another component of EV batteries, is the Democratic Republic of Congo.
But the commission is deeply concerned about the domestic U.S. content and assembly requirements in the tax credit plan and claims this only favours certain mineral-rich countries, to the detriment of EU products exported to America.
The commission said that EU subsidy schemes are available for domestic and foreign producers.