During US President Joseph Biden’s visit to South Korea in May this year, Hyundai Motor management received personal assurances from him that he was ready to provide support, but the anti-inflation legislative package he passed at the end of the summer did not reflect any preferences subsidizing Korean-made electric vehicles in the United States. This is just one example of the contradictions impeding the development of South Korea’s foreign trade.
As noted financial times Citing South Korean Commerce Minister Ahn Duk-geun, the country’s authorities are now trying to resolve the issue of its absence from the list of electric vehicle and traction battery manufacturers who can count on sales in the United States about government subsidies. Canada, the United States and Mexico are among the countries whose products are eligible to participate in the program, under which the US authorities allow buyers of electric vehicles a $7,500 deduction if the citizen’s income is below a certain threshold .
Hyundai Motor in Georgia, which will assemble electric vehicles, will not start operations until 2025, but for now all cars of related Korean brands sold in the US will be assembled in their historic homeland. This does not make them eligible for the purchase grant program under the new rules. If the American side does not show the necessary flexibility in solving this problem, the South Korean authorities can use the WTO to influence their foreign partners, the Korean minister said.
US export restrictions to China pose a problem for Korean semiconductor manufacturers. In particular, Korean companies that apply for subsidies to set up companies in the United States cannot expand their production in China for 10 years with technical processes of 28 nm and later. As the minister points out, South Korean companies in China mainly produce more mature products aimed at civilian use. South Korea’s export-oriented economy is increasingly suffering from the escalating tensions between Beijing and Washington.
Over the next decade, this country’s relationship with China will change, according to the Minister of Commerce of South Korea, taking into account the United States’ control over technology exports. Trading turnover can increase or change noticeably in its structure. The focus can shift towards less technologically advanced products, but at the same time sales can grow. The South Korean authorities intend to offset the losses to China by strengthening economic ties with the United States and the European Union.
The South Korean authorities have not yet been able to establish constructive business relations with Japan either. For example, the adoption of a trilateral free trade agreement with China is stalled. Japanese officials are also blocking South Korea’s participation in another economic alliance known as the Comprehensive and Progressive Trans-Pacific Partnership Agreement, which covers the interests of 11 countries in the region. Tensions with Japan exist for historical reasons related to the occupation of the Korean Peninsula by Japanese forces during World War II.