{"id":2202599,"date":"2023-10-30T17:00:58","date_gmt":"2023-10-30T08:00:58","guid":{"rendered":"https:\/\/koreapro.org\/?p=2202599"},"modified":"2023-10-31T13:44:54","modified_gmt":"2023-10-31T04:44:54","slug":"why-frances-green-drive-sparks-trade-concerns-in-south-korea","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/10\/why-frances-green-drive-sparks-trade-concerns-in-south-korea\/","title":{"rendered":"Why France\u2019s green drive sparks trade concerns in South Korea"},"content":{"rendered":"
France\u2019s recent decision to <\/span>amend its electric vehicles subsidy policy<\/span><\/a> may pose significant challenges for South Korean car manufacturers. This move follows the U.S. Inflation Reduction Act (IRA), which allocates <\/span>$369 billion<\/span><\/a> to promote green investments.<\/span><\/p>\n Under the proposed French policy, car manufacturers are eligible for tax credits based on the vehicle\u2019s price and fuel efficiency. These credits are further influenced by carbon emissions throughout the supply chain, including those from transportation. This methodology potentially excludes Asian countries, especially South Korea, from these subsidies, thus favoring domestic French and neighboring European manufacturers.<\/span><\/p>\n The French government cited environmental concerns as the primary rationale behind the policy change, emphasizing that the previous subsidy framework did not account for transportation-related emissions. Nevertheless, some stakeholders infer a strategic intent to bolster the domestic and neighboring European car industries.<\/span><\/p>\n Agnes Pannier-Runcher, the French energy transition minister, <\/span>stated<\/span><\/a> on a French news channel that the government aims \u201cto reward the greenest EVs, especially those made in France and the EU.” She posited that the move would foster job growth in the country and potentially lead to more competitive car pricing for local consumers.<\/span><\/p>\n South Korea had previously <\/span>voiced concerns<\/span><\/a> about the IRA as a potential trigger for a surge in global protectionism. This apprehension gains traction with France\u2019s latest policy shift, as other European countries might consider similar measures to favor domestic industries.<\/span><\/p>\n For South Korean manufacturers, the implications are considerable. In the first half of 2023, Europe was their second-largest market after North America. Their sales to the European Union grew by <\/span>over 30%<\/span><\/a> to $261 million and auto parts exports increased by 23.1% to $369 million.<\/span><\/p>\n The automobile sector plays a crucial role in South Korea\u2019s economy, contributing <\/span>13%<\/span><\/a> to its manufacturing output and 12% of employment. The potential impact of France\u2019s new subsidy policy on South Korean car exports to Europe is a looming concern, especially given that <\/span>nearly 70%<\/span><\/a> of cars Hyundai and Kia sold in France last year were under the French subsidy umbrella.<\/span><\/p>\n The exact magnitude of the potential economic implications for South Korea\u2019s automobile industry remains uncertain. However, experts anticipate challenging times ahead. Moon Jong-chol, a research fellow at the Korea Institute for Industrial Economics and Trade, <\/span>stated<\/span><\/a> that the IRA might significantly impact the competitiveness of South Korean-manufactured electric vehicles.<\/span><\/p>\n Similarly, South Korean officials have voiced concerns about the potential repercussions of protectionist actions in the U.S. and Europe on their automotive market. South Korea\u2019s National Assembly speaker Kim Jin-pyo <\/span>suggested<\/span><\/a> the possibility that the IRA, along with similar protectionist policies, could impede South Korean companies from fulfilling their investment commitments in the U.S.<\/span><\/p>\n LEGAL COMPLICATIONS<\/b><\/p>\n The legality of France\u2019s proposals under the <\/span>EU-South Korea Free Trade Agreement<\/span><\/a> (FTA) is contested. Ratified in 2011, this agreement abolished customs duties on nearly all products and removed numerous non-tariff barriers for exports, automobiles included. Crucially, the FTA enshrines protections against \u201ctrade discrimination.\u201d<\/span><\/p>\n The Korea International Trade Association and the Korea Business Association Europe <\/span>posit<\/span><\/a> that France\u2019s current stance might breach the EU-South Korea FTA. Their argument rests on the claim that while domestic and European companies would be entitled to subsidies, South Korean firms would be left out.<\/span><\/p>\n The South Korean government is actively seeking measures to shield its car manufacturers. For instance, it has <\/span>persuaded<\/span><\/a> France to permit companies to contest carbon emission calculations. However, if these efforts fall short, Seoul will likely resort to legal channels against its European partners to protect this vital industry.<\/span><\/p>\n Regardless of the dispute\u2019s resolution, one thing is clear: South Korea will take steps to adapt to an increasingly protectionist global landscape, as Seoul\u2019s economic growth largely depends on exports.<\/span><\/p>\n