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| Trade Minister Lee Chang-yang speaks during a session at the National Assembly on Yeouido, Seoul, Monday. Korea Times file |
By Lee Kyung-min
No meaningful outcome is expected within a desired timeframe from Korea taking the U.S. to the World Trade Organization (WTO) for putting Korean manufacturers of electric vehicles (EVs) at a significant cost disadvantage in the world's largest economy, market watchers and experts said Tuesday.
They say Korea is taking collateral damage from the U.S. Biden administration seeking a dramatic upswing in sinking approval ratings ahead of the November mid-term elections, mostly through protectionist policies to revitalize the U.S. economy scarred from years of the COVID-19 pandemic.
The Biden administration denies tax credits of up to $7,500 (10 million won) to buyers of EVs manufactured outside the country, as stipulated under the Inflation Reduction Act (IRA).
The act includes spending a record $369 billion for climate and clean energy drives, through which the country's carbon emissions will be cut by 40 percent by 2030.
Certain to cripple are Hyundai Motor, which has its manufacturing plants based in Korea. Korea's automotive giant with a growing market share in the U.S. said it will begin operation of its U.S. assembly lines in Georgia in August 2024, months sooner than in the first half of 2025.
Trade Minister Lee Chang-yang said during a National Assembly session Monday that Korea will consider filing a complaint with the international trade body against the U.S. act. Korea's top trade negotiator Ahn Duk-geun will discuss the issue with his U.S. counterpart during his trip to Washington next week.
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| Hyundai Motor's Ioniq /Korea Times file |
Questionable efficacy yet needed step
"The minister's remarks were more of a gesture in a broader context, not of anything tangible," said Moon Jong-chol, a research fellow at the Korea Institute for Industrial Economics & Trade (KIET).
The remarks were, in his view, the least the country's top trade authority could make, however ineffective the WTO complaint may be.
"Policymakers cannot sit on the sidelines when Korea's leading growth driver industries are certain to take a hit. The WTO dispute settlement is far from a silver bullet in this case, and the government knows it."
The Biden administration is desperate to swing the public sentiment in his favor, with an ultimate goal of establishing far more extensive manufacturing plants within its borders, according to Han Sang-man, president of the Korean Academic Society of Business Administration.
"The message is clear," he said. "The U.S. is saying that Hyundai should move its assembly lines in Ulsan to the U.S. state of Alabama, and create quality jobs. Many working-class Americans will welcome the move, pushing up the approval ratings of Biden and the Democrats in the upcoming election."
Korea should, he added, closely monitor the developments as to whether the issue would signal a return to full-blown protectionism, a highly undesirable turn of event for Korea.
"Strengthened protectionist sentiment in the global trade conditions will spell trouble for Korea, an export-oriented economy underpinned by growth of goods and services reliant on select manufacturing industries," Han said.
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