Photo: CABALLERO-REYNOLDS/AFP/Getty Images
This week’s column returns to two recent topics of discussion: the electric vehicle (EV) tax credit and the proposed ban on TikTok. (Incidentally, in an ironic turn of events, I had my TikTok debut last week talking about—what else—TikTok.) Both issues at the moment appear to represent a small step in the direction of rationality, although there is clearly a long way to go.
On the EV tax credit, last Friday, the Treasury Department issued its long-awaited guidance on what would qualify for the credits. In doing so, it answered some questions but left some of the most controversial for later, including
Of course, we can anticipate the answers. China will certainly be a country of concern—the question will be how deeply into corporate ownership the Treasury Department will look. Are only companies controlled by Chinese entities excluded, or are those that have minority Chinese involvement also excluded, or even those that may simply be doing business in China? On the specific vehicles, companies have already begun announcing which of their models they expect to qualify, and, while the number is not zero, it will clearly be smaller than those eligible for the existing credits. On the minerals agreements, it is a foregone conclusion that they will be considered trade agreements, much to the annoyance of members of Congress, albeit for different reasons.
On that point, some members, notably Senator Joe Manchin (D-WV), object because they believe such a designation would go beyond congressional intent and would detract from the statute’s effort to promote U.S. manufacturing. Others, including members of the Ways and Means and Finance Committees, seem more concerned about the lack of consultation and refusal to submit the agreements to Congress for approval, an issue I sympathize with and discussed last week.
One controversial issue the guidance did address was whether the mineral powders that go into batteries would be considered critical minerals or parts and components. In opting for the former, the Treasury Department took a somewhat more liberal interpretation of the law, which will make compliance marginally easier.
These decisions, both the ones made and the ones punted, are an attempt to navigate between three contradictory goals: accelerating the transition to green autos, reducing our dependency on China, and promoting domestic manufacturing. To the extent we pursue the last two, we delay the first. The administration argues, more or less accurately, that these are transition problems, and the combination of incentives and content restrictions will ultimately get us to the right place. The problem is timing. The restrictions go into effect starting next year, well before companies will be able to restructure their supply chains to comply with the restrictions and scale up production. If consumers wait to take advantage of the tax credits, the transition to EVs will slow down, which may, in turn, slow down company efforts to ramp up production.
That might lead one to expect the environmentalists to march on Congress demanding a loosening of the restrictions, but they face dilemmas too. While they support transitioning away from fossil fuels, battery manufacturing, particularly mining and processing the necessary minerals, is a dirty, messy business, and for many years the United States has been content to let China deal with the mess. The administration’s efforts to bring that to the United States will take NIMBYism to new heights and force us to choose between approaches that each have bad environmental consequences. Even with the Treasury Department guidance and its follow-on decisions, you can be sure battles over this policy will continue.
While there has been no action on a TikTok ban since I last wrote about it, it appears that the rush to judgment has slowed down, and the people who think a ban is a bad idea have begun to speak out more loudly. This is based on the growing sense that a ban would probably violate the First Amendment, be difficult to enforce (never underestimate the ability of teenagers to get around government-created obstacles), and be a political disaster with younger generations—and is not the biggest security problem we have anyway. Also, the debate has begun to focus not only on security but on the harm TikTok does to young people. The problem with that argument, if you agree with it, is that it is equally applicable to the other social media platforms like Facebook and Instagram—not owned by China—and argues for a broader approach that regulates all of them.
In both these cases, I see a modest move toward rationality. The Treasury Department is doing its best to deal with a law that was poorly conceived, inadequately vetted, and badly drafted. Its decisions may be unpopular with those who caused the problems in the first place, but they seem to be an effort to maximize flexibility within strict statutory limits. The fundamental contradictions are still there, but Treasury Department’s approach is reasonable. On TikTok, it looks like we could be moving beyond paranoia and hysteria toward a more rational discussion of the problem and a sensible way to deal with it. Rationality, however, does not come easily these days, and it remains to be seen whether it will stick around.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
