{"id":2207062,"date":"2024-11-07T16:29:02","date_gmt":"2024-11-07T07:29:02","guid":{"rendered":"https:\/\/koreapro.org\/?p=2207062"},"modified":"2024-11-08T17:02:53","modified_gmt":"2024-11-08T08:02:53","slug":"donald-trumps-win-sets-stage-for-digital-trade-battle-with-south-korea","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/11\/donald-trumps-win-sets-stage-for-digital-trade-battle-with-south-korea\/","title":{"rendered":"Donald Trump\u2019s win sets stage for digital trade battle with South Korea"},"content":{"rendered":"

Donald Trump\u2019s election victory poses new challenges for U.S.-ROK economic ties, and one of the first is likely to be a looming dispute over Seoul\u2019s efforts to regulate digital trade.<\/span><\/p>\n

Five lawmakers from South Korea\u2019s ruling People Power Party <\/span>proposed an amendment<\/span><\/a> to the country\u2019s <\/span>Monopoly Regulation and Fair Trade Act<\/span><\/a> on Oct. 28, which seeks to impose tighter controls on digital platforms.<\/span><\/p>\n

The move has already sparked <\/span>strong objections<\/span><\/a> from U.S.-based tech firms and their advocates, including the Computer and Communications Industry Association (CCIA).\u00a0<\/span><\/p>\n

Given Trump\u2019s preference for protectionist trade policies, his administration will likely leverage the <\/span>U.S.-Korea Free Trade Agreement<\/span><\/a> (KORUS) to push back against the proposal to shield U.S. companies from regulations viewed as discriminatory.<\/span><\/p>\n

PROPOSAL AND OBJECTIONS<\/b><\/p>\n

The South Korean government\u2019s proposal aims to curb perceived anti-competitive practices in the digital marketplace by regulating dominant platform operators. The proposed changes would allow South Korea\u2019s Fair Trade Commission (KFTC) to issue \u201ccorrective\u201d orders for practices like self-preferencing, where platforms prioritize their own products over competitors\u2019.<\/span><\/p>\n

Other measures include restricting practices like tying and bundling (where consumers are required to buy additional products or services) and enforcing most-favored-nation clauses, which require platforms to offer the same terms they provide in other countries. The amendment would allow the KFTC to impose fines of up to 8% of sales on firms violating these rules.<\/span><\/p>\n

The CCIA, an international trade association representing a range of technology and telecommunications companies, argues that these regulations unfairly target U.S. tech giants, primarily Google, Meta and Amazon. These firms are deeply embedded in South Korea\u2019s digital ecosystem: According to Seoul\u2019s technology ministry, Google and Facebook accounted for 27.1% and 3.5% of all <\/span>data used in the country in 2021<\/span><\/a>, respectively.<\/span><\/p>\n

The CCIA asserts that the amendment\u2019s criteria disproportionately apply to foreign firms, potentially violating fair trade standards set by KORUS. According to the CCIA, the focus on U.S. firms while leaving local and Chinese competitors less encumbered is \u201cinappropriate,\u201d given South Korea\u2019s high level of digital market competition.<\/span><\/p>\n

The CCIA also warns that the policy could open doors for Chinese e-commerce platforms, such as <\/span>AliExpress and Temu<\/span><\/a>, to expand aggressively in the South Korean market, possibly undermining U.S. companies\u2019 market share.<\/span><\/p>\n

\"\"

Donald Trump poses for a picture after signing an executive order to expand \u201cMade in America\u201d production, Aug. 7, 2020 | Image: Trump White House Archives<\/a><\/em><\/p><\/div>\n

TRUMP\u2019S ARSENAL<\/b><\/p>\n

Trump\u2019s first administration took a hard line on trade, using <\/span>tariffs<\/span><\/a> and renegotiated agreements to assert U.S. economic interests. Given the contentious nature of the South Korean proposal, Trump\u2019s team may engage South Korea directly through KORUS\u2019 built-in review mechanisms.<\/span><\/p>\n

Under KORUS, either country can request a consultation on measures perceived as unfair, a process that may be instrumental in urging South Korea to soften or adjust the regulatory focus.<\/span><\/p>\n

By highlighting the ROK\u2019s dependence on U.S. market access \u2014 2023 exports to the U.S. totaled <\/span>over $115.7 billion<\/span><\/a> \u2014 the Trump administration could argue that the digital regulation harms a key economic partner.<\/span><\/p>\n

Trump\u2019s history of negotiating from a position of strength suggests he may approach Seoul with an expectation of compromise, especially as U.S. tech companies continue to expand their footprint in South Korea.<\/span><\/p>\n

Trump\u2019s record includes leveraging tariffs to respond to policies he perceives as unfair, notably imposing <\/span>25% tariffs on $250 billion worth of Chinese goods<\/span><\/a> during his first term.<\/span><\/p>\n

If Seoul proceeds with a law that Trump deems punitive toward U.S. firms, he could threaten similar measures on South Korean exports, potentially disrupting substantial automotive and electronics exports to the U.S. Such threats could prompt Seoul to rethink the amendment\u2019s scope to avoid a trade conflict.<\/span><\/p>\n

Trump\u2019s team might also offer South Korea an alternative: Hold off on tariffs if the KFTC modifies its approach. Such a move would align with Trump\u2019s established strategy of using tariffs as negotiating tools.<\/span><\/p>\n

For South Korea, conceding on certain regulatory points to avoid tariffs could be seen as a pragmatic move to safeguard broader economic ties, albeit at the cost of some regulatory independence.<\/span><\/p>\n

Trump could seize this opportunity to <\/span>revisit KORUS<\/span><\/a>, focusing specifically on digital trade protections. The U.S. might press for additional clauses that explicitly prevent policies singling out U.S. firms for regulatory scrutiny, effectively securing exemptions from certain South Korean digital market rules.<\/span><\/p>\n

This would be in line with Trump\u2019s previous efforts to reshape trade pacts, such as his renegotiation of the <\/span>North American Free Trade Agreement<\/span><\/a> into the <\/span>U.S.-Mexico-Canada Agreement<\/span><\/a>, which featured updated provisions for digital trade and intellectual property protections.<\/span><\/p>\n

South Korea is an important market for U.S. digital services, with America\u2019s digital exports to the ROK valued at <\/span>around $12 billion<\/span><\/a> in 2020. Trump\u2019s desire to protect this market for U.S. companies may encourage him to push for adjustments in KORUS that not only guard American firms from perceived bias in South Korea but also provide a model for future digital trade policies with other Asian economies.<\/span><\/p>\n

\"\"

Donald Trump delivers a speech from the White House | Image: Trump White House Archives<\/a><\/p><\/div>\n

RISKS AND OPPORTUNITIES<\/b><\/p>\n

South Korea has some options to avoid inflaming trade tensions. Seoul could argue that the proposal does not directly target U.S. firms but rather aims to regulate the largest digital platforms impacting the local market.<\/span><\/p>\n

However, such an argument is unlikely to sway Washington because U.S. tech giants such as Google, Meta and Amazon are precisely those with the most significant market share and influence, making them more likely to be affected by any size-based or market share-based criteria. This practical impact on U.S. firms may still be perceived as selective, even if the regulatory language is ostensibly neutral.<\/span><\/p>\n

Another path would be to establish a bilateral working group under KORUS, where U.S. and South Korean officials could negotiate regulatory adjustments that align with both countries\u2019 interests. This model, similar to the <\/span>U.S.-EU Trade and Technology Council<\/span><\/a>, could allow for structured dialogue on digital market rules, reducing the likelihood of retaliatory measures.<\/span><\/p>\n

Trump\u2019s tariff-driven trade policy raises the risk of significant economic consequences if the amendment moves forward unchanged. If Trump imposes tariffs on Korean goods, South Korea\u2019s economy could feel a direct hit, given its reliance on exports to the U.S.<\/span><\/p>\n

However, Trump\u2019s hardline stance may prompt South Korea to agree to more digital trade protections within KORUS, creating a more stable business environment for U.S. firms and potentially strengthening KORUS as a model for digital trade policy across Asia. The U.S. and Korea could cooperate on policies that promote reliable cross-border data flows, fostering innovation and consumer benefits in both markets.<\/span><\/p>\n

South Korea\u2019s approach could help it gain international standing as a leader in digital platform regulation. By aligning with globally recognized standards, such as the EU\u2019s <\/span>Digital Markets Act<\/span><\/a>, South Korea could establish itself as a regulatory model for other markets. This approach could enhance Korea\u2019s influence over the standards governing digital competition worldwide.<\/span><\/p>\n

With <\/span>shared concerns<\/span><\/a> over China\u2019s expanding influence in digital markets, the U.S. and South Korea might find common ground in developing digital security measures that protect both economies. Coordinated efforts could encompass data protection standards or joint research initiatives, bolstering U.S.-Korea ties and adding a layer of digital security to their economic partnership.<\/span><\/p>\n

For South Korea, Trump\u2019s return to the White House means having to enter into protracted trade discussions and reaching compromises to mitigate Trump\u2019s protectionist stance. Adjusting the proposed amendment could help Seoul avoid trade retaliation while setting a regulatory standard in Asia\u2019s evolving digital economy.<\/span><\/p>\n

Edited by Bryan Betts<\/span><\/i><\/p>\n

Business & Economy<\/span><\/a>Inter-Korean & Foreign Relations<\/span><\/a>Technology & Cyber<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"

Donald Trump\u2019s election victory poses new challenges for U.S.-ROK economic ties, and one of the first is likely to be a looming dispute over Seoul\u2019s efforts to regulate digital trade. 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