While the Biden administration is putting on a show of trying to manage its tension-fraught relationship with China, Sen. Joe Manchin (D-W.Va.) is not making this task any easier.
Ahead of the meeting between the US president and his Chinese counterpart, Xi Jinping, the Democratic Senator from West Virginia piled more pressure on Joe Biden. The Senate Energy and Natural Resources Committee chair sent a letter to the Treasury Department administration on Monday, urging tweaks to the implementation of the Inflation Reduction Act (IRA).
Specifically, the Democratic senator is pushing for a narrower interpretation of "electric vehicle incentives" contained in the IRA, referencing its Section 30D of the New Clean Vehicle Credit (30D).
In his letter addressed to Treasury Secretary Janet Yellen, he called for companies that source critical minerals from foreign adversaries such as China to be prevented from being rewarded with the abovementioned electric vehicle tax credits.
"I urge you to impose the strictest possible standards for FEOCs [Foreign Entity of Concern] to ensure the minerals in electric vehicles are, to the greatest extent possible, sourced in the United States or from legitimate allies," he wrote.
The US senator claimed his concerns were rooted in rumors that Chinese battery companies were hoping to avail themselves of these credit opportunities.
"I am incredibly concerned by recent reports that suggest Chinese battery companies are actively pursuing business opportunities and arrangements, including joint ventures and investments, in South Korea and Morocco to take advantage of the IRA," he added.
US tax incentives Congress provided for "domestic manufacturers, and our friends and allies," the politician wrote, "cannot be allowed to be hijacked by adversaries engaging in mineral laundering."
Ever since Congress passed the Inflation Reduction Act, implementation of its amendments to Section 30D has been a holdup, as it awaits guidance from the Treasury Department on what exactly constitutes a “Foreign Entity of Concern." Manchin has been arguing that the rules were specifically aimed at weaning US battery supply chains away from China.
One glaring example is the situation regarding Ford Motor Co. It has a deal to license the technology of Chinese battery manufacturer Contemporary Ampler Technology Limited (CATL) for use in its $3.5 billion planned battery plant in Michigan. However, whether this arrangement will meet the Treasury's tax credit accessing standards is yet to be determined, with the plant project suspended.
Biden-Xi Sit-Down
The letter from Joe Manchin comes as Joe Biden and Xi Jinping are set to meet at the Asia-Pacific Economic Cooperation (APEC) summit held in San Francisco from November 11 to 17. As it is, experts are not holding their breath regarding likely outcomes from the sit-down. It has been noted, however, that among the current US-China reengagement efforts, Biden and Xi are expected to broach restoration of communications between the two countries’ militaries. With next year’s US presidential election looming, the Biden team has been on a trajectory aimed at tempering the mutual acrimony of recent years. Hence the flurry of visits to China by US officials, the most recent of which was Janet Yellen.
Following talks with Chinese Vice Premier He Lifeng, the US Treasury secretary said the two sides had agreed that in-depth, frank talks between the United States and China are important, and that it was crucial to "maintain resilient lines of communication going forward."
US-China Track Record
Relations between Beijing and Washington have been steadily deteriorating since Biden’s predecessor Donald Trump unleashed a trade war against China. Since then, the United States has sought to target Chinese tech companies with economic sanctions, and over the last year - trying to constrict Beijing's access to cutting-edge chips and the manufacturing equipment. The restrictions, along with Washington's CHIPS and Science Act of 2022, were portrayed as limiting China's technological prowess. The US government cited national security concerns, claiming that it was restricting the export of cutting-edge technologies that China could use for military purposes or to enhance its domestic semiconductor capabilities.
In response, China warned that the industrial policy bill to support the local producers of semiconductors would disrupt global supply chains and hamper international trade. In retaliation for US trade restrictions targeting Chinese technology, Beijing imposed curbs on the export of graphite, a key battery metal. The decision, conveyed jointly by the Ministry of Commerce and the General Administration of Customs, cited national security concerns, and came days after the United States enforced further restrictions on the types of semiconductors that American corporations can supply to Chinese firms. China's graphite move followed controls it implemented on gallium, critical to the production of microchips.
Amid the semiconductor trade spat with Beijing that Washington launched, America’s own semiconductor companies responded with the warning that such measures could backfire, eviscerating their own businesses.