Future electric vehicle trade agreements could bypass Congress

February 25, 2023

Future trade agreements focused on battery minerals for electric vehicles between the United States and the European Union and other allies might not need approval from Congress. Reuters reported that U.S. Treasury Secretary Janet Yellen told reporters at the G20 finance meeting in India that the agreements would be aimed at granting automakers in those nations access to U.S. tax credits for electric vehicles. The agreements would also likely include high labor standards and export control provisions to ensure secure supply chains.Some in the EU have complained that its automakers are shut out of the $7,500 per vehicle tax credits in the climate-focused Inflation Reduction Act. Yellen said future agreements could address those complaints.

The Inflation Reduction Act specified that the tax credits were only available to North American-assembled vehicles that meet certain local battery production and mineral extraction processing standards.

Countries with U.S. free trade agreements can also access the credits, and this is a provision that the Biden administration hopes to exploit by negotiating limited trade deals focused on battery minerals.

Reuters reported that the Treasury already is allowing leased electric vehicles to qualify under commercial EV tax credit rules, a move that Yellen said would cover most vehicles for now. Over time, she said she hoped that trade agreements would allow more sold vehicles to qualify over time.

“It would be an agreement that we think would not require the agreement of Congress,” she said adding that Congress intended “a kind of friend-shoring approach” for critical minerals to reduce reliance on China.

“I think the word ‘free trade areas’ was meant to mean reliable friends and partners with whom we can feel we have secure supply chains so we feel this is fully the intent of Congress and we’ll be able to negotiate such agreements,” Yellen said.

The Treasury in March is due to put out guidance on the sourcing of battery minerals and Yellen said this will include guidance on free trade areas that can qualify.

The Treasury already has said that it will qualify existing comprehensive free trade pacts Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, South Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru and Singapore.



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