hankyoreh

Gina Raimondo, the US secretary of commerce, gives a press briefing on Sept. 6 regarding semiconductor subsidies. (Reuters/Yonhap)

Although Seoul announced Thursday that it will be forming a bilateral consultative group with the US in order to solve the issue of discrimination against Korean-made electric vehicles, which the Inflation Reduction Act excluded from tax credit considerations, an actual solution remains a long way off. As the US speeds up its policy of reorganizing supply chains for cutting-edge technology, such as semiconductors and batteries, to center itself, more and more Korean companies and foreign companies that were considering investing in South Korea are heading to the US. Korea urgently needs to devise a trade strategy that comprehensively considers the damage South Korea may incur due to “America First.”

US Secretary of Commerce Gina Raimondo’s recent Wall Street Journal interview, in which she stated that she persuaded the Taiwanese semiconductor company GlobalWafers, which had been considering investing 7 trillion won in South Korea, to ultimately invest in the US in June, is emblematic of the issue. When the Taiwanese company revealed that the cost of constructing factories in South Korea would be one-third that of doing so in the US, Raimondo said she would “make the math work” and cut factory-building costs in the US, ultimately leading to the company choosing to build a plant in Texas.

US President Joe Biden also said during a speech on Sept. 5 that “manufacturers all over the world are coming to the US,” boasting South Korean companies’ large-scale investments in the US as one of his greatest achievements.

With the US implementing its strategy of supporting domestic companies competing with China in the cutting-edge technology sector while absorbing factories run by foreign companies into the US in earnest, South Korea and other US allies are taking a hit.

With Samsung Electronics, SK and Hyundai Motors announcing trillions of won in investments according to the US’ policies, concerns are being raised regarding the hollowing out of manufacturing in South Korea as well as jobs.

South Korean companies are facing an impasse, with Korean-made electric vehicles made ineligible for tax credits on the one hand, as the Inflation Reduction Act stipulates that electric vehicles should be assembled in North America in order to be eligible for the tax credits; on the other hand, South Korean companies are facing US regulations that forbid semiconductor companies receiving US funding for factory construction from building high-tech manufacturing facilities in China for the next 10 years.

The South Korean government should take the electric vehicle tax credit snub as an opportunity to set its trade strategy in good order amid the challenges posed by “America First.” It should cooperate with the US where cooperation is needed considering cutting-edge technology and the needs of the market, but also come up with solutions that aim to heighten South Korea’s competitiveness and expand jobs in the country.

Regarding the US’ tendency to share burdens with its allies while monopolizing benefits, the South Korean government should clearly and consistently raise questions while working together with Europe and Japan.

Please direct questions or comments to [english@hani.co.kr]