EU Mulling WTO Complaint Over Inflation Reduction Act Incentive Rules

The EU is looking into whether the protectionist items in the recently passed U.S. Inflation Reduction Act violate World Trade Organization rules, EU Trade Commissioner Valdis Dombrovskis told Bloomberg, the publication reported Sept. 10. The IRA -- a $437 billion tax, health and climate bill -- included provisions to boost North American production of electric cars, providing tax credits for electric vehicles made in North America. After a few years, the credits will only available to vehicles with advanced batteries that cut China out of their supply chains, and where the majority of the battery's value is from North America. Dombrovskis expressed concern over these measures along with the IRA's broader preference for U.S. manufacturing when it comes to government procurement.

"We have concerns about a number of discriminatory elements in this Inflation Reduction Act which puts requirement for local content, for local production,” Dombrovskis said. “So we are assessing if it’s in line with WTO requirements and with government procurement agreement. ... Currently we are doing this assessment and based on that we will check what our options are to best react to this situation." He added the EU will “not jump into conclusions before we do the assessment, but we are assessing the options.”

South Korea has previously stated its dissatisfaction with the rules, which favor USMCA-assembled EVs and batteries, broadcasting its willingness to file a WTO complaint, Bloomberg said.