Controversy over EV subsidy rules overshadows South Korean president’s first US visit

Controversy over EV subsidy rules overshadows South Korean president’s first US visit

By Hyonhee Shin

SEOUL (Reuters) – South Korea’s opposition to new rules governing U.S. subsidies for electric vehicles is set to overshadow President Yoon Suk-yeol’s first official trip to the United States, disrupting a recent show of alliance strength with Washington.

Yun, who was in London for the funeral of Britain’s Queen Elizabeth, left for New York late Monday to attend the UN General Assembly. He will fly to Canada on Thursday for the final leg of his trip before returning home on Saturday.

In New York, Yun will hold a summit with US President Joe Biden, where both leaders are expected to discuss North Korea’s growing weapons threats and growing concerns in South Korea over the Inflation Reduction Act (IRA), which Biden signed last month.

The new law eliminates federal tax credits for electric vehicles (EVs) made outside North America, meaning companies such as Hyundai Motor Co and subsidiary Kia Corp will no longer be eligible for such subsidies.

The law has sparked complaints from government officials in Seoul, who see it as a betrayal of Biden’s promises to strengthen bilateral economic ties after South Korean companies agreed to make major investments and build factories in the United States.

Seoul officials have said the law could violate a bilateral free trade agreement and have asked Washington to delay the new rules until Hyundai finishes building its Georgia plant in 2025. Yoon is likely to repeat that request in the upcoming summit.

Some senior South Korean officials have moved in recent weeks to convey concerns to their US counterparts and push for exemptions, though the solutions are unclear. Commerce Minister Lee Chang-yang will travel to the United States this week to discuss the IRA, the ministry said on Tuesday.

US national security adviser Jake Sullivan told his South Korean counterpart Kim Sung Han earlier this month that the IRA would bring “more positives than negatives” to Korea, but promised to review the impact of the new rules.

“It’s structurally quite complicated because it’s already signed into law, but there is a way to do it,” said a senior South Korean official closely involved in the discussions, speaking on condition of anonymity because of the diplomatic sensitivity of the matter.

When asked about the IRA, Yun’s senior finance secretary, Choi Sang-mok, said neither side had yet set an agenda for the summit, but could discuss the issue in light of its importance.

Yun is also struggling to make progress on other key diplomatic and security issues, such as improving relations with Japan and bringing North Korea into denuclearization talks.

Yoon’s office said it plans to hold its first bilateral meeting with Japanese Prime Minister Fumio Kishida in New York, although some Japanese media reported the meeting may not take place as legal wrangles over historic disputes remain unresolved.

South Korean Foreign Minister Park Jin met his Japanese counterpart in New York on Monday, where he asked the Japanese to work with Seoul to resolve their differences, Park’s office said in a statement.

According to a senior official in Yun’s office, the president also plans to use his address to the UN General Assembly to reiterate the need for North Korea to denuclearize, with Pyongyang rejecting Seoul’s recent overtures and talks remaining deadlocked .

A diplomatic source told Reuters that Seoul and Washington were exploring how to reopen denuclearization talks.

“Our responses to the North’s recent moves have been low-profile, which is intended not to give the level of attention they want,” the source said, speaking on condition of anonymity because of the sensitivity of the matter.

“But we are sending a clear message that another nuclear test will trigger real consequences, even harsher than the decisive decisions and measures taken after the sixth test and long-range missile launches.”

(Reporting by Hyonhee Shin; Editing by Josh Smith, Ana Nicolaci da Costa and Lincoln Feast)

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