Congress chafes at Biden's critical mineral plan with European Union
Washington — Bipartisan members of Congress are questioning the fairness of President Joe Biden’s efforts to treat the European Union as a free trade partner in order to qualify for new electric vehicle tax credits.
It is the latest step in the administration’s efforts to quell the diplomatic uproar caused by the Inflation Reduction Act, which aimed to wean the United States off of Chinese clean energy supplies by bolstering domestic and allied supply chains.
The Inflation Reduction Act, passed last year, created new consumer-facing discounts for electric vehicles. But to qualify, an EV has to be assembled in the U.S. and include increasing amounts of battery minerals and components sourced domestically or from a free-trade partner.
Allies like the European Union, the United Kingdom and Japan criticized the legislation over concerns that they would be boxed out of new electric vehicle investments, in part because they are not among the 20 countries with which the United States currently shares a free trade agreement.
West Virginia Democratic Sen. Joe Manchin, who shaped the new credits, has since said that he didn’t know the United States and the European Union didn’t have such an agreement when he wrote the law.
The Treasury Department has said it plans to generously interpret the meaning of a free trade agreement, and last week Biden announced he and European Commission President Ursula von der Leyen would “immediately begin negotiations” on a critical minerals agreement “for the purpose of enabling relevant critical minerals extracted or processed in the European Union to count toward requirements for … (the) clean vehicle tax credit of the Inflation Reduction Act.”
The administration is reportedly pursuing similar agreements with Japan and the United Kingdom.
That didn’t sit well with several members of Congress, who questioned Treasury Secretary Janet Yellen about the administration’s plan — particularly because the Constitution gives Congress the power to regulate trade with other countries.
“We need to work with our allies on shared climate goals, but I also want to stress that the unprecedented way these agreements were written. With this exercise, we continue to upend the separation of powers on trade authorities,” said Rep. Linda Sanchez, D-California.
“I want to focus on those agreements and how those will affect domestic union supply chains that we’re trying to foster ... California is home to one of the largest untapped lithium reserves in the world, which is close to the Salton Sea. How might this ‘select buyers’ club’ undermine investments back home?”
The Inflation Reduction Act “creates very strong incentives” to develop minerals in the United States, Yellen said. “However the global demand for these minerals in the years to come will be enormous, and we’re highly dependent on China.”
Rep. Brian Fitzpatrick, a Republican from Pennsylvania, cited similar concerns and questioned the fairness of U.S. automotive trade relationships with the European Union and Japan. The E.U. imposes a 10% tariff on American autos exported to their member countries, while the U.S. imposes a 2.5% tariff on European automotive imports, he said, and that there are “non-tariff barriers that disadvantage American auto exports” in Japan.
“The thought is that in order to improve the security of our supply chains, the United States might negotiate agreements pertaining to critical minerals,” Yellen responded. “There would have to be requirements, presumably a requirement that you couldn’t put export controls in place.”
The discussion also comes as the European Union launches a plan of its own to implement subsidies to promote local production of clean technologies and limit imports from China.
White House officials declined to elaborate upon the potential critical mineral agreement, citing ongoing negotiations with the European Union.
Rep. Dan Kildee, D-Flint Township, agreed “there is general concern about the direction of trade negotiation and where that authority lies.”
Sen. Ron Wyden, a Democrat from Oregon and the chair of the Senate Finance Committee, also said in prepared remarks Thursday that he has “serious concerns” about the administration’s approach to implementing the critical mineral sourcing provisions of the IRA.
“Free Trade Agreements cannot be unilaterally decided by the Executive Branch. They require consultation and consent from Congress,” he said. “That includes any agreements on critical minerals.”
But some industry advocates find it to be a positive development. Genevieve Cullen, president of the Electric Drive Transportation Association, said the administration should ensure the credit “works to grow and diversify supply chains” including with U.S. allies.
“This summer, the president said it may need some tweaks,” she said. “This is exactly that, and I think it’s important. We want a secure, reliable and sustainable EV supply chain. Working with our allies and partners is a good thing.”