South Korea’s anger over what it sees as discriminatory treatment by the United States of Korean electric vehicle makers highlights the difficulty Washington faces in engaging even its closest allies to his vast economic plans for Asia.
US legislation passed last month offers tax credits of up to $7,500 to buyers of electric vehicles assembled in North America. The measure, which is part of the Cut Inflation Act, is aimed at shutting China out of supply chains and boosting U.S. production of electric cars, analysts said.
But in doing so, the bill also removed tax credits for dozens of foreign-made electric vehicles, making them much more expensive for American buyers. Among the hardest hit are South Korea’s Hyundai and its subsidiary Kia, which rank second in sales in the U.S. electric vehicle market, behind Tesla.
South Korean businessmen and politicians erupted after the legislation was passed, calling it a betrayal of the principles of the World Trade Organization, as well as the US free trade agreement and South Korea, which they claim prohibits such discrimination against products imported from each other.
“The United States is transforming itself from a guardian of free trade into a disrupter of international trade norms,” said an editorial in the left-leaning Hankyoreh newspaper. ” Essentially, [U.S. President Joe] Biden’s ‘Build Back Better’ is no different from [former U.S. President Donald] Trump’s “Make America Great Again”, said conservative Joongang Ilbo.
Some South Korean media have even questioned whether Seoul should respond by reconsidering its participation in US-led regional economic initiatives, such as the Indo-Pacific Economic Framework (IPEF) or the “Chip 4” semiconductor alliance. “, both of which are seen as crucial to US efforts to compete with China.
In a Tuesday briefing, South Korean Commerce Minister Ahn Duk-geun said the trade dispute should be handled separately from Seoul’s participation in multilateral forums, but acknowledged the disagreement could “shake trust in the [U.S.-South Korean] business relationship itself.
South Korea’s frustration is broadly in line with that of many other Asian countries, which question whether Washington is as committed to free trade as it once was. While many U.S. partners were appalled by Trump’s 2017 decision to pull out of the massive Trans-Pacific Partnership (TPP) free trade deal, they remain disheartened by Biden, who has continued many of Trump’s trade policies. Trump.
Doubts about the American commitment
Partly to deter such concerns, the White House in May unveiled the IPEF, a trade deal designed to counterbalance China’s economic clout in Asia. IPEF’s 14 member states held their first negotiations last week; the United States aims to conclude the negotiations by next November.
But the IPEF differs from traditional free trade agreements in that it does not provide greater market access or lower tariffs – areas that are no longer considered safe in the domestic US political context. Without such incentives, there may not be enough benefits for countries to accept binding commitments in areas such as environment and labor, according to reports from the Center for Strategic and International Studies, who interviewed the representatives of the countries involved in the IPEF negotiations.
The Biden administration has also indicated that the IPEF will not be subject to US Congressional approval, raising concerns that it could be overturned by future US presidents.
During the IPEF rollout in May, Japanese Prime Minister Fumio Kishida said he welcomed increased US economic involvement in Asia and would support IPEF talks, but preferred that the United States joins the TPP, now known as the CPTPP.
Another major part of Biden’s Asia strategy is Chip 4, a planned semiconductor supply chain partnership between the United States, Japan, South Korea and Taiwan.
Chip 4 is intended to reduce China’s influence in the vital microchip sector. But U.S. partners, including South Korea, have expressed concern that the move could lead to Chinese retaliation. Perhaps reflecting this unease, South Korean officials frequently refer to the Chip 4 grouping as an “advisory body” rather than an alliance.
South Korea’s dilemma
The balance between China and the United States is particularly delicate for South Korea, which hosts about 28,000 American troops but relies on China as its main trading partner.
South Korea’s conservative President Yoon Suk Yeol, who took office in May, has moved to expand his country’s economic and security ties with the United States, making the current trade dispute even more acute. uncomfortable.
Although the United States has agreed to talks with South Korea to minimize the impact of recent US legislation, that has not stopped a wave of South Korean criticism directed at both Yoon and Biden.
So far, the backlash has been mostly limited to furious newspaper editorials and statements of concern from business and government officials.
Jeongmeen Suh, an economics professor at Soongsil University in Seoul, predicts that the dispute will not lead to major anti-US protests, as US policy only affects some major South Korean companies and may not be felt. by average citizens.
But if not resolved quickly, the disagreement could lead to diplomatic fallout, analysts warn, such as Seoul filing a WTO complaint. Some voices have called on South Korea to take a more assertive stance in line with its growing economic and diplomatic influence.
“If Korea remains passive, it could again become the victim of the great powers,” reads a recent editorial in Hankyoreh. “Korea needs to overcome its ‘small country’ mentality and adopt an active attitude.
Lee Juhyun contributed to this report.