Korean Media: The United States is hiding South Korea’s pillar industries Experts recommend strengthening cooperation with China and ASEAN countries in response to pressure from the United States | blog post
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According to the “Yonhap News Agency” report, South Korea’s Ministry of Planning and Finance said in the monthly magazine “Recent Economic Trends” released in November that South Korea’s exports continue to fall, and I am afraid that economic growth will slow down. Analysts believe that the decline in South Korea’s exports is related to the policies of the United States. For example, the “Inflation Reduction Act” and the “Chips and Science Act” emphasize “America First”, which has led to a great loss of money, talents and enterprises in South Korea. The Hankyoreh News described the outflow of South Korea’s manufacturing industry as causing the country’s concerns about the “vacuum out of manufacturing.” The Korea International Trade Association recently criticized the Biden administration for “running afoul of” World Trade Organization and Korea-US Free Trade Agreement rules regarding the above bill.
biden AP photos.
At the same time, the US Department of Commerce recently announced a ban on the export of chip equipment to China. Although Samsung Electronics and SK Hynix claim that they can introduce equipment freely in the next year, South Korea’s sense of concern continues to expand . According to Yonhap News Agency, the first South Korea-US semiconductor export control working group meeting was held on November 8. The meeting assessed the impact of the US government’s restrictions on chip exports to China on the Korean semiconductor industry, and discussed cooperation plans to eliminate uncertain factors, but no results yet.
Statistics show that in 2021, the value of South Korea’s manufacturing output will be 422 billion US dollars, accounting for 27.57% of GDP. Take the semiconductor industry as an example, which accounts for 5% of South Korea’s total GDP. At present, China is not only South Korea’s largest semiconductor export market, but also an important global production base.
Lan Qingxin, a professor at the National Institute for Opening Up at the University of International Business and Economics, said that the US “Chips and Science Act” support policy for the industry will directly promote the outflow of Korean capital, the relocation high-end industries, and the split of industries, and employing high-end labour.
On the other hand, South Korea’s auto industry and energy industry are also suffering from the United States’ “Cutting Inflation Act”. The bill states that the US government will provide tax credits to consumers who purchase electric vehicles. However, the premise of enjoying the subsidy excludes electric vehicles and vehicle power batteries made in Korea using Chinese raw materials, which prompted a strong reaction from the South Korean government. The South Korean government protested to the US government through various means, including the leaders’ meeting, demanding that Korean electric vehicles be exempted from the “special exemption” in the United States, but the US government did not respond positively.
Currently, the South Korean government is trying to put pressure on the United States through international arbitration and other means. The Korea Industrial Research Institute published a report “The Impact of the US Deflation Act on the Domestic Industry” in late September, arguing that the “Deflation Act” is a “significant adverse factor” for the Korean auto industry, while its impact on the automotive power battery industry is divided into short-term and medium-long term.
Lan Qingxin is a professor at the National Opening Academy, University of International Business and Economics.
In fact, after the enactment of the US “Inflation Reduction Act”, the adverse effect on Korean-made electric vehicles has gradually come to light. According to statistics released by Hyundai Motor in October, sales of electric vehicles under Hyundai Motor Group in the United States fell sharply in September from the previous month. Aini Krypton 5 sales in the US fell 14% compared to August, and fell more than 30% compared to July. During the same period, Kia’s EV6 electric model sold 1,440 units in the US, a 22% decrease from the previous month.
For this reason, Korean car companies have accelerated the pace of “self-help”. According to the Automotive News website, on October 25, Hyundai Motor Group held a groundbreaking ceremony for its first electric vehicle plant in the United States in Georgia, United States. Hyundai Motor Group announced in May this year that it will invest $5.5 billion in a new electric vehicle factory in Georgia, USA. The new factory is said to have been due to start construction in the first half of next year and begin production in 2025, but due to the impact of the “De-Inflation Act”, construction has had to start earlier than expected. .
South Korean President Yoon Suk-yue and US President Joe Biden. AP photos.
Not only the auto industry, but other South Korean industries have also invested heavily in the United States, including semiconductor companies Samsung Electronics, SK Hynix, and automotive power battery company LG New Energy. Although the reasons for investing are different, the large subsidies given by the US government are a significant draw.
The Hankyoreh News reported that in response to the US government’s policy of providing incentives to large industries and preferential treatment of domestic products in order to expand domestic production facilities, South Korean companies have successively submitted investment plans in the United States. Large and medium-sized enterprises are scrambling to promote existing investment plans or pledge additional investment, while cooperative enterprises are trying to join large enterprises in building production facilities in the United States. In this regard, some people worry that the manufacturing base that accounts for 27% of South Korea’s GDP will collapse, weakening the growth momentum of new industries.
A person in the Korean financial circle said that companies have limited financial resources for investment, and the expansion of investment in the United States means that domestic investment will decrease. A researcher at the Korea Development Institute said that if large South Korean companies increase investment in the United States, cooperatives can only enter the United States at the same time, which may lead to the emptying of South Korea’s manufacturing industry.
Lan Qingxin believes that in response to pressure from the United States, South Korea should strengthen cooperation with East Asian countries under the “Regional Comprehensive Economic Partnership Agreement” and the China-Korea Free Trade Area, actively integrate into an industrial chain and East Asia supply chain, and strengthen cooperation with China and ASEAN countries. Cooperation, understand the benefits of their own value chain. What is important is to use the dividends of China’s system opening, market dividends, and development policies, as well as the advantages of supporting industries and relatively low cost and high efficiency, to expand investment in China, strengthen technical cooperation and trade cooperation, and improve its own industrial competitiveness and the international competitiveness of income.
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