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National Review
National Review
17 Mar 2023
Jordan McGillis


NextImg:Biden Fails at ‘Friendshoring’

NRPLUS MEMBER ARTICLE ‘F riendshoring” is among the cringiest neologisms of the modern geopolitical era. It also happens to be an excellent idea. To “friendshore” is to site manufacturing and other aspects of the industrial supply chain within countries that share norms surrounding trade, rights, and the rule of law while avoiding countries (read: China) that trample upon them.

While in South Korea last July, Treasury secretary Janet Yellen lent the Biden administration’s imprimatur to the concept, arguing that:

Countries that espouse a common set of values about international trade and conduct in the global economy should trade and get the benefits of trade so we have multiple sources of supply and are not reliant excessively on sourcing critical goods from countries where, especially, we have geopolitical concerns.

Despite this sensible rhetoric, President Joe Biden’s policy preferences continue to reflect a contradictory and self-defeating protectionist impulse. Among the countries that have found themselves on the losing end of Biden’s protectionism is the very one from which Yellen made her pronouncement: South Korea.

Hailed as President Biden’s signal legislative achievement, the Inflation Reduction Act (IRA), passed in August 2022, encapsulates the Biden approach to industry. The IRA spends big on the ambitious, if debatable, goal of speeding up America’s adoption of lower-carbon technologies. Rather than applying its tax incentives in a neutral way that would facilitate efficient purchases of products such as electric vehicles, however, the law and the guidance to it provided by Biden’s Treasury Department explicitly channel business to American manufacturers. The new law effectively limits the incentive now known as the clean-vehicle credit to cars and trucks assembled in North America with North American battery components.

For the EV market this immediately yielded perverse outcomes; in South Korea it has called into question the Biden administration’s commitment to Pacific economic alignment. As recent coverage from the Los Angeles Times shows, the IRA strikes a vicious body blow against South Korea–based Hyundai, an automaker that has made a rapid pivot to EVs and whose all-electric Ioniq 5 was just crowned by MotorTrend as the best SUV of the year.

Taken together, U.S. sales of the Ioniq 5 and the EV6 (sold by Hyundai’s Kia brand and built on the same platform) tallied 37,000 vehicles in the first three quarters of 2022, outpacing the Ford Mustang Mach-E on the EV-sales list. But since the passage of the IRA, Hyundai has found itself in the wilderness and has been surpassed by Ford in sales numbers. Despite its MotorTrend award, the Ioniq 5 sold 19 percent fewer units in the United States in February 2023 than it did in the same month a year prior. While that’s good news for Ford, it is an indication that within the EV market the IRA is steering American car buyers to vehicles they would otherwise view as less suitable — a welfare-reducing market distortion.

Hyundai and the Korean government have doggedly lobbied the administration for six months to adjust its guidance, an appeal made more powerful by Hyundai’s preexisting investment in production facilities in the state of Georgia. While they may yet succeed at obtaining the switches necessary to put Hyundai back on track in the U.S. — Treasury has hinted at forthcoming changes — the policy to date is not an aberration but rather an implementation of President Biden’s long-standing hostility to trade even with our closest allies.

As I wrote for National Review in December 2020, Joe Biden’s electric-vehicle campaign platform was riddled with protectionist appeals masquerading as China policy. Korea, I wrote at that time, was becoming more important in the sector, and yet then-president-elect Biden portrayed the industry as a Beijing plaything. Biden’s initial plan for an American EV industry overlooked these nuances, I argued, and pandered, as the plans of his predecessor did, to domestic anxieties about globalization more broadly. Those concerns have now pulled Hyundai into a regulatory quagmire.

As the Biden administration wages geo-economic battle against China, trust between the United States and the smaller countries of the Pacific region over which China seeks to assert hegemony is paramount. South Korea is not only a treaty ally, but a font of industrial ingenuity that delivers Americans quality goods at affordable prices, such the Hyundai Ioniq 5. The plight of Hyundai and its would-be customers stateside reveals the incoherence of the Biden industrial agenda. Contrary to its “friendshoring” rhetoric, the current administration’s concrete protectionism is undermining its own supposed agenda: from taking care of the environment and improving economic outcomes to countering China’s influence in the Pacific.