Since its passage, President Joe Biden and congressional Democrats have championed the Inflation Reduction Act (IRA) as a significant step forward in combating climate change. Unfortunately, it’s also turned into a boondoggle to the advantage of the United States’ chief adversary, the People’s Republic of China (PRC) and the Chinese Communist Party (CCP).
This legislation unlocked billions of U.S. tax dollars in the form of incentives for green energy, allowing Chinese firms to strengthen their position in the U.S. market.
Chinese companies, many deeply tied to the CCP, are establishing electric vehicle (EV) battery plants across the country, increasing America’s dependence on Chinese technology and undercutting U.S. domestic industry and national security, and may receive taxpayer dollars to do so.
The Biden administration is complicit, whether they know it or not. The administration has failed to put sufficient guard rails in place to prevent the PRC and the CCP, from pocketing U.S. taxpayer dollars via the IRA – something the legislation was never intended to permit.
While parts of the bill, such as the Clean Vehicle Credit, include some restrictions against foreign exploitation, others, notably Section 45X – the Advanced Manufacturing Production Credit – lack such protective measures. This section, aimed at incentivizing domestic manufacturing of green energy components, including EV batteries and wind and solar equipment, could cost taxpayers around $135 billion according to Congressional Budget Office estimates. This raises a crucial question: how many of these billions are going directly to Beijing?
Given the rapid emergence of these Chinese factories in the U.S., it’s likely significant.
Today, the most active opposition against China’s incursion into America’s EV industry isn’t coming from Washington, but from local activists and concerned citizens in Michigan and Illinois, where the first of these Chinese factories are being built. For example, Gotion, a Chinese EV battery company with close ties to the CCP, is working to build an EV plant in Big Rapids, Michigan, just a short distance from key U.S. military installations, such as Camp Grayling, where the Michigan National Guard trains Taiwanese troops every Summer. Gotion reportedly expects to receive tax incentives for this site – but that was before local activists rose up and recalled five officials of Green Charter Township and the Supervisor of neighboring Big Rapids Township who greenlit the deal. Now, new leaders in the township are working to end the arrangement altogether.
Meanwhile, in Manteno, Illinois, local residents are mobilizing and using all available means, including legal action, to block another Gotion factory from being built in the area. Local residents in Marshall, Michigan, have also fought against the establishment of an EV battery plant Ford plans to build alongside Chinese firm CATL. Reports indicate Tesla may establish a similar plant in Texas.
Amid all of this activity, the Biden administration has been radio silent.
The silence from the White House is deafening when compared to red flags waved by our national security and intelligence agencies over such “deals”, and when compared to the very public groundswell of local activism. The administration’s apparent indifference, and its willingness to provide tax incentives that could benefit Beijing, reveals a serious policy misalignment. The responsibility to counteract Chinese economic infiltration, more aptly described as “economic warfare”, is a federal responsibility now being picked up by local communities who seem to understand the threat better than Washington.
Congress must act now to stop Chinese companies from coming to U.S. shores, lured by U.S. tax dollars made available by the IRA. It is imperative for U.S. policy to incentivize only American firms to develop EV batteries domestically, rather than attracting foreign companies with taxpayer-funded incentives.
Senator Marco Rubio (R-FL) has had his eye on this issue for the past year, most recently introducing the Protecting American Advanced Manufacturing Tax Credit Act, alongside Rep. Carol Miller (R-WV), that would ensure that 45X tax credits do not flow to Chinese companies. his targeted approach should be able to gain bipartisan support. This builds on his other efforts, including CFIUS reviews of Chinese battery plants and direct outreach to the Defense Department to halt U.S. military entities from using Chinese-batteries on military bases.
Reps. John Moolenaar (R-MI) and Darin LaHood (R-IL) have also introduced the No Gotion Act that would ensure IRA tax incentives have similar guardrails, another step in the right direction.
Congressional action on these bills is critical to deterring more Chinese companies from setting up shop in the U.S. and to prevent U.S. taxpayer dollars from directly benefiting America’s chief adversary. Speaker of the House Mike Johnson would send a strong signal to the Biden administration and Chinese companies by prioritizing this issue in the new year.
Local residents shouldn’t be responsible for countering the CCP’s effort to dominate American industry. That’s Washington’s job, and our lawmakers need to get to work.
Pete Hoekstra is a Principal Advisor of the Michigan - China Economic and Security Review. He served as United States Ambassador to the Netherlands from 2018-2021, he previously served on the U.S. House of Representatives House Intelligence Committee from 2001-2011 and represented Michigan’s 2nd congressional district from 1993 to 2011. Joseph Cella is the Director of the Michigan - China Economic and Security Review Group. He served as the United States Ambassador to Fiji, Kiribati, Nauru, Tuvalu, and Tonga from 2019-2021.
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