President Joe Biden has a tough call to make in the next five days. And no matter which choice he makes, he is guaranteed to face blowback. He must choose between adding U.S. jobs to the economy and honoring a U.S. International Trade Commission ruling regarding intellectual property rights.
South Korean battery manufacturer SK Innovation is currently building a plant in Commerce, Georgia, which is expected to create 2,600 new US jobs, according to Politico. The plant would provide electric batteries for a variety of Volkswagen models and Ford Trucks.
The issue is a February USITC ruling which established that SK “stole trade secrets from rival South Korean company LG Chem and ordered that the U.S. block SK from importing components to build batteries.”
Under federal law, according to the report, the “President and the U.S. trade representative” must decide in the next five days whether to uphold or to disapprove the USITC ruling.
As in most White House decisions, interested parties have tried to sway Biden and his advisers in both directions. Among those with special interests is Carol Browner, who is “working with SK” to lobby Biden on the company’s behalf. Browner served in both the Clinton and Obama administrations. She told Politico, “If the president does not disapprove of the ITC decision, I think it’s very hard to envision SK staying in the U.S.”
Does Biden want to create 2,600 American jobs, while “undermining intellectual property laws?” Or would he prefer to uphold the ITC ruling?
As always, there are outside factors to be weighed. And they come from the most unexpected and seemingly unrelated sources. As demand for COVID-19 vaccines increases worldwide, the White House has been pressured by the World Trade Organization to suspend patent protections which they believe would increase the supply. The Washington Post reports, for example: “Only in recent weeks did such nations as Ghana, Cambodia and Nigeria welcome their first vaccine shipments — and only enough to cover about 2 percent of their populations.” Sen. Bernie Sanders of Vermont has been campaigning for this.
Additionally, SK, Georgia’s Republican Gov. Brian Kemp, and the state’s two Democratic senators are pushing Biden to disapprove the ITC ruling. According to Politico, they argue that the U.S. will have to look to Chinese companies to meet demand “if the plant is scrapped.”
According to analytics firm Benchmark Mineral Intelligence, China leads the world in “battery manufacturing today, with more than 90 major factories, compared with three in the U.S.”
Simon Moores, a managing director at Benchmark, told Politico, “The U.S. won’t be producing enough of its own batteries in the next five years. … You’re going to have to import them, because the U.S. doesn’t have the capacity, and European battery sales are for European customers, so the only other place left is China.”
For their part, LG Chem tells the White House they no longer rely on China for “components or materials.” The report says LG Chem is planning to “invest $4.5 billion in new battery manufacturing in the U.S.,” possibly in Georgia.
Still more pressure comes from the USITC itself. The organization claims that SK had “destroyed documents related to the trade case” and said this had been “ordered at a high level and was carried out by department heads throughout SK.”
I am just scratching the surface of the wheeling and dealing that’s occurred behind the scenes related to this decision.
There does remain the possibility that LG and SK could solve this problem between themselves before Biden is forced to act.
A former official from the Office of the U.S. Trade Representative, who spoke to Politico on the condition of anonymity, indicated that “LG has said it is open to a settlement that would allow SK to finish its factory in return for ‘compensation’ for the stolen intellectual property.”
“That could also resolve a parallel case in the D.C. Circuit Court, where LG is suing SK. The two sides have so far been unable to agree on a deal, but trade officials have been pushing the companies to the table since before Biden took office.”
Perhaps the looming deadline will motivate the companies to reach a compromise. This would be the optimal solution.
If not, Biden will learn once again that campaigning is easy and governing is hard.