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The impact of US EV subsidies on trade and investment

Published 04 April 2023

The US Treasury published the long-awaited implementing rules for the Inflation Reduction Act. How will these rules affect trade and investment flows? What advantages does CPTPP membership bring to the UK? Explore our reading list for the latest developments in global trade.

IRA implementing rules and guidelines

IRA implementing rules newly published by the US Treasury will likely reduce EV sales in the short term while aiming to spur long-term industry growth, reports Politico. The US and Japan have negotiated a new agreement to allow Japanese critical minerals to qualify under US subsidy rules, per the Wall Street Journal. Building critical mineral supply chains without Chinese production will be a challenge, says Bloomberg. Indonesian business argues that it should qualify for US subsidies, writes the Financial Times.

Mentioned publications

  1. Treasury Releases Proposed Guidance on New Clean Vehicle Credit to Lower Costs for Consumers, Build U.S. Industrial Base, Strengthen Supply ChainsUS Department of the Treasury, March 31, 2023
    The US Treasury issues long-awaited implementing guidance on electric vehicle subsidies. 
  2. IRS rules for electric cars unveiled after months of attacksPolitico, March 31, 2023
    Implementing rules will likely reduce EV sales in the short term, but aim to spur long-term industry growth. 
  3. Agreement between the Government of the United States of America and the Government of Japan on Strengthening Critical Minerals Supply Chains Office of the US Trade Representative, March 28, 2023 
    A new US-Japan agreement allows Japanese materials to qualify for tax credits.
  4. U.S. and Japan Strike Deal on Minerals Used in Batteries for Electric CarsThe Wall Street Journal, March 28, 2023
    Putting the new US-Japan accord on minerals in context. 
  5. Biden Tees Up a Supply-Chain Rethink With Challenge to China’s EVsBloomberg, March 28, 2023 
    More details are emerging about the challenge of building a critical mineral supply chain without China. 
  6. Indonesia business presses US over green subsidies for EV minerals – Financial Times, March 30, 2023 
    Indonesian business makes the case for inclusion in US subsidies for EV battery materials. 

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Global economic fragmentation and its discontents

Factors pushing toward deglobalization are on the rise. What will such economic fragmentation mean for the global economy? The International Monetary Fund provides an analysis, while Adam Tooze highlights tools to measure shifting patterns of globalization. The world will regret its retreat from globalization, argues Eswar Prasad in Foreign Policy.

Mentioned publications

  1. Geoeconomic Fragmentation and the Future of MultilateralismInternational Monetary Fund, January 15, 2023 
    What could deglobalization mean for the global economy?
  2. Globalization: The shifting patchwork – Adam Tooze, Chartbook, February 27, 2023 
    What tools do we have to measure shifting patterns of globalization?
  3. The World Will Regret Its Retreat From Globalization – Eswar Prasad, Foreign Policy, March 24, 2023 
    A recent history of globalization, the retreat from it, and the challenges this presents going forward.

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Two years of Biden’s trade policy

US trade policy has changed significantly since 2017, with a concerted shift toward progressive trade policies under the Biden Administration. The Center for American Progress describes a new horizon in US trade policy, while the White House makes its case for industrial policy, in Foreign Policy. America’s zero-sum economics doesn’t add up, argues Adam Posen in Foreign Policy. There is a growing trade policy split between the White House and Congress, notes Sandler, Travis and Rosenberg, while the Wall Street Journal reports that Biden’s trade deals are drawing warnings from Congress. Alan Beattie argues in the Financial Times that Congress is partly to blame for its own impotence on trade. 

Mentioned publications

  1. A New Horizon in U.S. Trade PolicyCenter for American Progress, March 14, 2023
    An assessment of Biden Administration's trade and industrial policy initiatives. 
  2. The White House’s Case for Industrial PolicyForeign Policy, March 2, 2023 
    Ambassador Tai makes her case for a new US trade and industrial policy. 
  3. America’s Zero-Sum Economics Doesn’t Add Up – Adam Posen, Foreign Policy, March 24, 2023 
    Why the current US approach to trade and manufacturing won’t accomplish what it sets out to do. 
  4. Growing Trade Policy Split Between White House and Congress Highlighted in HearingsSandler, Travis & Rosenberg, PA, March 30, 2023 
    Trade policy hearings lay bare differences between key Congressional leaders and the Administration. 
  5. Biden’s ‘Go It Alone’ Trade Deals Draw Warnings From CongressThe Wall Street Journal, March 19, 2023 
    Is the Executive branch becoming too creative in negotiating trade agreements without Congress?
  6. US Congress shares the blame for its own impotence over trade – Alan Beattie Op-ed, Financial Times, March 30, 2023 
    Mini deals cutting out the US Congress are nothing new, and Congress is partly to blame. 

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The UK joins the CPTPP

The UK has concluded negotiations to join the CPTPP. What will CPTPP membership do for the UK? Sam Lowe provides the answer in Most Favoured Nation. What comes next for the UK and for the CPTPP? The Center for Strategic and International Studies offers its analysis. Where should UK trade policy go from here? David Henig argues for building a mature UK trade policy for the European Centre for International Political Economy. 

Mentioned publications

  1. What Does CPTPP Actually Do? – Sam Lowe, Most Favoured Nation, March 30, 2023 
    What advantages does CPTPP membership bring for the UK?
  2. The United Kingdom Is Joining the CPTPP. What Comes Next?Center for Strategic and International Studies, March 31, 2023 
    The UK’s accession is the first expansion of CPTPP membership since its entry into force in 2018.
  3. Building a Mature UK Trade PolicyDavid Henig, European Centre for International Political Economy, March 2023 
    What are the objectives of UK trade policy?

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