EU says US electric vehicle tax credit could break WTO rules

Category: Business


Unlocking Word Meanings

Read the following words/expressions found in today’s article.

  1. discriminatory / dɪˈskrɪm ə nəˌtɔr i / (adj.) – giving unfair treatment to people based on their age, race, religion, or gender

    The company was criticized for being discriminatory in its hiring.

  2. incompatible / ˌɪn kəmˈpæt ə bəl / (adj.) – does not agree with something

    The new work policy is incompatible with my personal beliefs, so I quit my job.

  3. incentive / ɪnˈsɛn tɪv / (n.) – a benefit that encourages a person to do something or work harder

    The teacher will give incentives to all students who always come to school on time.

  4. robust / roʊˈbʌst / (adj.) – successful and unlikely to fail or weaken

    They’ve built a robust system that’s designed to last for decades.

  5. detriment / ˈdɛ trə mənt / (n.) – damage, loss, or disadvantage

    He buys a lot of expensive things that he doesn’t need, much to the detriment of his savings.


Read the text below.

The European Union expressed concern that a new U.S. tax credit plan aimed at encouraging Americans to buy electric vehicles would discriminate against European producers and break World Trade Organization rules.

Under the Inflation Reduction Act nearing final approval in the U.S. Congress, a tax credit of up to $7,500 could be granted to lower the cost of an electric vehicle. To qualify, the bill requires that electric vehicles should contain a battery built in North America with minerals mined or recycled on the continent.

“The European Union is deeply concerned by this new, potential, trans-Atlantic trade barrier,” European Commission spokeswoman Miriam Garcia Ferrer said. “We think that it’s discriminatory, that it’s discriminating against foreign producers in relation to U.S. producers.”

“Of course this would mean that it would be incompatible with the WTO,” she said. The commission is the EU’s executive branch, and part of its responsibilities is to conduct trade with the outside world on behalf of the bloc’s 27 nations.

The commission agrees that tax credits are “an important incentive to drive the demand for electric vehicles” and ultimately to help reduce greenhouse gas emissions. “But we need to ensure that the measures introduced are fair,” the spokeswoman said.

The idea behind the U.S. requirement is to encourage domestic manufacturing and mining, build a robust battery supply chain in North America and lessen the industry’s dependence on overseas supply chains that could be subject to disruptions.

Production of lithium and other minerals that are used to produce EV batteries is now dominated by China. The world’s leading producer of cobalt, another component of EV batteries, is the Democratic Republic of Congo.

But the commission is deeply concerned about the domestic U.S. content and assembly requirements in the tax credit plan and claims this only favors certain mineral-rich countries, to the detriment of EU products exported to America.

EU subsidy schemes, the commission said, are available for domestic and foreign producers alike.

This article was provided by The Associated Press.

Viewpoint Discussion

Enjoy a discussion with your tutor.

Discussion A

  • Do you think the U.S. should address the EU’s concern of probable discrimination against foreign suppliers, or should the country focus on its own region’s goals (ex. encouraging domestic manufacturing and mining, lessening the industry’s dependence on overseas supply chains)? Why? Discuss.
  • How do you think the government can encourage manufacturers to stop the production of gas cars and just focus on producing electric cars? Discuss.

Discussion B

  • Do you think your country should also create a bill granting a tax credit to lower the cost of electric vehicles? Why or why not? Discuss.
  • If your country would offer a tax credit for any product or service, what do you think it should be for (ex. eco-friendly products)? Why? Discuss.