Confusion and trade rules are speed bumps for Biden’s EV goals

President Biden wants Americans to transition from gas-powered vehicles to electric ones, but his unclear trade policies and too few trade agreements make that difficult.

The Biden administration sees widespread electric vehicle (EV) adoption as pivotal in combating climate change and achieving a sustainable future. In an attempt to ensure that future, the Environmental Protection Agency recently introduced a new tailpipe emissions rule that states gas-powered cars should make up no more than 30 percent of auto sales by 2032.

That will be a real challenge. The EV share of new auto sales was 7.3 percent in the first quarter of 2024, down from 7.8 percent in the fourth quarter of 2023. The industry is witnessing a slowdown in EV sales growth. 

If widespread EV adoption is truly a priority, then America’s trade policies, some of which Biden inherited and some of which are his own, need another look. Because right now, they are a big speed bump.

Many Americans hesitate to embrace electric vehicles out of concerns about reliable charging options, the initial purchase cost and range anxiety. Addressing those will be crucial to expanding the EV market. International trade can help Biden reach the goal. But it requires going back to basics, including congressionally approved free-trade agreements.

The Inflation Reduction Act requires that critical minerals in EV batteries be sourced domestically or from a free-trade partner. Existing law is vague on who exactly these partners are. Until now, the administration has been pursuing critical mineral agreements with the understanding that participating nations qualify as free-trade agreement partners as far as the act goes.

The agreements aim to help U.S. automakers build out cost-competitive EV supply chains. The United States has signed a critical minerals deal with Japan. Negotiations with the European Union, United Kingdom and Indonesia are underway.

But a new bill recently proposed would put the brakes on those talks. The House Ways and Means Committee recently passed H.R. 7983, the “Stop Executive Overreach on Trade Agreements Act.” 

The bill’s sponsors say it’s time Congress reasserts its constitutional authority over trade policy, and the act would “protect the role of Congress by defining [a free trade agreement] to be an international agreement that is approved by Congress and eliminates restrictions on substantially all trade with the partner.”

With all of the global trade rules, restrictions and content requirements for critical minerals and battery components, the lack of clarity around what constitutes a free trade agreement partner poses a real problem that needs to be addressed. As the Center for Strategic and International Studies’ Bill Reinsch has said, “This is not an idle exercise in semantics.”

Nobody wants to commit to a long-term source agreement with a mining or refining company when the contractual terms could suddenly disintegrate with the next political whim. It’s time to get to work because private sector firms and investors need to trust that a secure agreement will be in place for a long time. A congressionally approved and codified free trade agreement is more durable than a stand-alone minerals agreement.

The United States has free trade agreements with some countries that are major mineral suppliers, like Chile and Australia. But other nations, such as The Philippines and Indonesia, have the minerals or the refining capacity to participate and want to be integrated into our supply chains. A standard trade agreement that reduces trade costs and covers a substantial amount of goods, including minerals, could help North American automakers build effective EV supply chains.

If EV adoption is the Biden administration’s top priority, then it would help to find ways to use more congressionally approved free trade agreements to make that happen.

Christine McDaniel is a senior research fellow with the Mercatus Center at George Mason University.