Opinion | Anti-China push in US Midwest a symptom of Biden’s dilemma
Not far away, in the small town of Manteno, Illinois, the opposition to a Gotion plant there has been even fiercer and partisan. Local Republican state representatives have accused the Biden administration, the state leadership of Governor J.B. Pritzker and China’s Communist Party of working together to build a plant that they say would cost taxpayers millions.
Electric vehicle (EV) and battery supply chains are front and centre in US-China economic competition. Taking into account Chinese companies’ practice of using intermediaries such as Mexico, the Biden administration has proposed amendments to the criteria to be met to avail subsidies offered under the Inflation Reduction Act.
An exhibit at the booth of Chinese battery manufacturer CATL at the 2023 International Motor Show in Munich on September 5. CATL’s involvement in energy projects in the United States has come under increased scrutiny from Republican politicians in recent months. Photo: Xinhua
The US Department of Energy has proposed guidance for what constitutes a “foreign entity of concern” under the Inflation Reduction Act’s electric vehicle tax credits, which provide up to US$7,500 in relief for each vehicle sold to consumers. EV manufacturers won’t qualify for the credits if any company in their battery supply chain has 25 per cent or more of its equity, voting rights or board seats owned by a Chinese government-linked company.
Senator Marco Rubio, a Republican from Florida, has spearheaded the campaign to scrutinise investments by Chinese companies in sectors deemed strategic by the US government such as batteries, semiconductors and critical minerals. While there appears to be bipartisan consensus on the “China challenge”, Republicans along with the United States House Select Committee on Strategic Competition between the United States and the Chinese Communist Party, which released a report offering 150 recommendations to address the challenge, are at the forefront of this campaign.
The recent decision by Duke Energy to disconnect batteries manufactured by CATL, the world’s largest EV battery manufacturer, at US Marine Corps Base Camp Lejeune in North Carolina was a result of intense campaigning by a bipartisan group of lawmakers.
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China-made battery plant upsets local residents in Hungary, triggering protests
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The issue has gone so far that US Representative Austin Scott, a Republican from Georgia, has sought language in the 2024 annual defence spending bill that would bar the Pentagon from purchasing or using battery technology made by CATL and other Chinese suppliers. National Counterintelligence and Security Centre director Mike Casey, whose agency coordinates with the US private sector over security threats, said companies should think twice before installing Chinese batteries.
These actions towards Chinese companies appear to run counter to the foundations of the Biden administration’s championing of a “foreign policy for the middle class”. The administration’s industrial policies aimed at reducing reliance on China and reviving manufacturing at home have faced roadblocks with limited options for reshoring in strategic sectors such as batteries, calling for increased reliance on allies and partners to friend-shore supply chains or at times settling for Chinese options.
The treatment of proposed plants in the US is a symptom of a larger phenomenon. For example, CATL has announced deals to supply batteries for commercial energy projects around the US, including in Texas.
To further complicate the issue, Wall Street continues to be invested in Chinese companies. JPMorgan Chase and UBS have invested in Chinese battery companies such as CATL. These firms do not view the US and China as zero-sum markets.
Recently, the US government reportedly raised its concerns with Mexico over its hosting EV plants from Chinese companies. Meanwhile, American companies have not decoupled from China. Ford, Tesla and others continue to expand their presence in China and follow the words of Mercedes-Benz CEO Ola Källenius: “for us, de-risking doesn’t mean reducing our presence in China but increasing it.”
Moreover, the Biden administration has attempted to dial back tensions by restarting talks at the highest levels with the Chinese government. Such moves could come at a cost. As the Biden administration, his predecessor’s policies and the Republican Party primary debates suggest, Democrats and Republicans are aware that the path to the Oval Office goes through middle America. The Biden administration is under even more pressure since these disputes are largely in swing states that could cost him electorally in the coming election.
Nonetheless, given China’s control over several nodes of the EV value chain and large American corporations being driven by shareholder interests over national security, the conflicting interests of various interest groups in Washington could make it challenging for the US – and particularly the Biden administration – to fight this multi-front war.
Akhil Ramesh is director of the India Programme and Economic Statecraft Initiative at the Pacific Forum
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