Opinion: Ford’s deal with Chinese electric vehicle battery maker is a heavy blow to American taxpayers

Who is right?

The US has always welcomed foreign direct investment (FDI). The US is one of the largest destinations for foreign direct investment in the world 5 trillion dollars. FDI is a positive for the economy, creating 5.3 million jobs, raising wages and increasing productivity. It also strengthens – in general – US manufacturing.

But in the case of Ford and CATL, such benefits are unlikely. This joint venture appears to be set up to allow Ford to reap the tax incentives provided for in the Inflation Reduction Act without receiving FDI or even technology returns.

Read: Ford is investing $3.5 billion in a battery plant in Michigan using technology from a Chinese partner

Instead, China is cleverly manipulating the American system of healthy competition into a game that pits two states with different political party leadership against one another, with significant consequences.

Politicians, regardless of party, need to think beyond the traditional paradigm that new factories always create good-paying jobs in their districts. Although this is usually true, China Inc. is a different economic model – “Capitalism with Chinese characteristics”.

This arrangement does not benefit the host country, as we have seen repeatedly with China’s Belt and Road Initiative, which has left developing countries drowning in accumulated debt Below average infrastructure projects. China’s behavior in these projects has also been shown not only to have no impact on economic development, but also spread corruption in the community.

With Ford, China is trying to break into America’s auto and EV battery market, and they would do it with hard-earned US taxpayer dollars. Everyone should sit up and take note: China is not our friend, as if that were not evident from the spy balloon that recently crossed the US

Congress and the Biden administration have introduced tax incentives to build a domestic battery supply to diversify away from overwhelming Chinese control over the technology. Department of Energy officials recently testifies before the Senate and said their goal is to build battery and other energy supply chains with non-Chinese suppliers.

However, Ford and CATL are clearly trying to evade the bill’s intent and ultimately force US taxpayers to support CATL. Meanwhile, Ford would get cheaper batteries at the expense of helping China gain market share in the US auto market.

While the Chinese are experienced in the battery value chain, CATL would not move battery fab technology at Ford to the US, as it rarely does China and technology transfer. Also, they would bring their own workers (if the US provides visas, which they shouldn’t), as is common with all Belt and Road projects.

Proponents of this deal believe CATL will transfer technology to the US, but it seems obvious they won’t share their secret sauce: Beijing has said it will review the deal “with an additional review at the national level”. ensure that no Chinese technology is handed over to Ford. This is particularly ironic as a key element the Chinese insist on in any joint venture in China is technology transfer.

Bottom Line: Although the Michigan plant would technically be owned by Ford, all manufacturing practices, processes and other components would be operated by CATL. In other words, it would be a Chinese CATL plant in all aspects except that Ford would legally own it so CATL could reap federal tax benefits.

It’s not a good idea to waste American tax dollars on the world’s largest battery maker. (CATL commands approx 34% of the global EV battery marketwith the Chinese government subsidies 20% of net income. Its market share is more than double that of its closest competitor, Korea’s LG Energy Solution 373220.
-0.59%.
) In addition, US taxpayers’ money would make the US battery supply chain even more dependent on China.

What’s the alternative? Instead of CATL, Ford should work with companies from allied countries, such as the Japanese Panasonic 6752.
+0.93%,
that makes batteries for Tesla
TSLA,
+5.32%
in the USA; Koreas LG that makes batteries for GM GM,
+0.56%
; and SK 034730,
-1.16%
for Hyundai. Stranger still, Ford already has a deal with SK Factories in Kentucky, so why turn to an adversary?

China steals regularly Intellectual property in the US accounting for 87% of all IP thefts annually, which is nearly 3% of US GDP. The US International Trade Commission estimates that intellectual property theft in China has cost money the loss of 2% to 5% of American jobs.

See: The liberation of the US economy from China will create a renaissance in American industry and millions of high-paying jobs

We’re all for trade and free trade if it’s fair. But the US must not subsidize China’s state-owned companies as China works to destroy our domestic EV battery industry as they did with solar — another US-invented technology — where China now has an 85% market share in modules has 80% polysilicon, 85% of the cells and 97% of the wafers, according to the IEA.

We encourage the US Treasury to prevent these types of structured transactions in upcoming IRA tax rules. In the meantime, Ford and Whitmer should reconsider this project, which will harm America’s economic and national security.

is dabable CEO of Bohr Quantum and former US Undersecretary of Energy for Science. Nordquist is Senior Advisor at the Center for Strategic and International Studies and former US executive director of the World Bank. Both serve on the ClearPath Advisory Board.

More: Ford is taking a Tesla-like approach to EV batteries

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