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The Chinese IRA weakness

Apr 18, 2024
Illustration of a parking lot full of red cars with a yellow star on the left similar to the flag of China

Illustration: Sarah Grillo/Axios

Republicans are moving bills to exploit a weakness in the IRA's electric vehicle credit: China's role in the global economy.

Why it matters: The effort presages how a Trump administration or GOP-controlled Congress may whittle the IRA's consumer EV tax credit program.

Driving the news: Two bills targeting President Biden's trade deals and EV industry IP licensing agreements won approval along party lines Wednesday from the Ways & Means Committee.

  • One of the measures would redefine a "free trade agreement" in the IRA to rule out mini-trade deals on minerals like the one Biden struck with Japan.
  • FTAs are crucial for cars to get the minerals-focused part of the EV credit — a policy that's intended to build a non-China minerals supply chain.

The other measure would make it so that qualifying manufacturers can't use "licensing agreements" with "foreign entities of concern" — a term used for Chinese businesses.

  • This is the issue that Republicans (and Joe Manchin) have with the Ford-CATL battery plant.

Between the lines: One would think bills undermining the IRA wouldn't stand a chance in the Senate. Yet on China policy, there's more than meets the eye.

  • House Democrats chafed at these bills during markup. But we're also watching the bipartisan frustration with that Japan deal.
  • The loudest critic has been Senate Finance Chair Ron Wyden. He told Axios he was unfamiliar with the House bill, but had texted with W&M Chair Jason Smith and pledged to get an update.

What they're saying: Raja Krishnamoorthi, ranking member on the House China select committee, told Axios that on these foreign supply chains, the "big issue here is: what are the alternatives?"

  • "Have we stood up any kind of supply chain in America or elsewhere that may be non-CCP related, that can take the place of whatever we are seeking to phase out?"

What industry's saying: Al Gore III of the Zero Emission Transportation Association defended the Biden administration's approach to the foreign sourcing language.

  • "[They're] rightly oriented around strengthening our control of battery and mineral supply chains and creating jobs across the United States," he said.

What's next: The most bipartisan space for anti-China bills on EV supply chains is the House select committee, which just lost its chair, Mike Gallagher, who is leaving Congress.

  • The new chair is John Moolenaar, whom you may recall authored legislation that would bar DOE from funding companies with China-related business deals.
  • "I think [Moolenaar] is going to continue Mike's general direction and his approach in the direction of bipartisanship," Krishnamoorthi said.
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