The South Korean steel industry is faced with a crisis due to growing trade protectionism. South Korea was granted a permanent exemption on steel tariffs from the U.S. in exchange for a quota on its steel exports to the nation. But the sparing of South Korean steel imports from the tariffs comes as little comfort, as various countries around the world are imposing import restrictions on Korean steel and metal products. Here is Choi Byung-il, international trade expert and professor at Ewha Woman’s University Graduate School of International Studies, to examine the current situation of South Korea’s steel industry, which is now the target of global trade protectionist measures.
South Korean steel products receive high marks as being the best in the world in terms of quality and price. But global demand for steel has decreased considerably since the 2008 global financial crisis, while advanced countries have imposed various restrictions on steel imports, citing the need to protect their local industries. The trend is inevitably afflicting major steel exporters like South Korea. In another negative development for Korea, state-run companies in China have increased steel output significantly over the last ten years on the back of government subsidies, resulting in an oversupply of steel products in the global market. For these two reasons—trade protectionism and an excess supply from China—the Korean steel industry is in a very difficult situation.
According to data released by the Korea International Trade Association, South Korea’s steel exports are subject to 95 cases of import restrictions such as anti-dumping and import safeguards by foreign countries. They are almost half of the 202 import restrictions for all South Korean exports. Twenty-eight of the restrictions on steel imports have come from the U.S., followed by Canada with 11, Thailand with eight and India with seven. And this year alone, six new cases have been added. As Professor Choi explained, the large number of import restrictions on South Korean steel products is attributable to rising trade protectionism and an excess supply of steel as a result of China’s overinvestment in steel production facilities. Let’s hear again from Professor Choi.
Steel comprises the key element of major industries. South Korea developed the steel industry even in the 1960s when the nation was badly off. Korea could have imported steel from other countries, but it decided to foster the steel industry, a basic industry that would be necessary for all economic activities from a long-term perspective. As I said, many countries have tried to protect their own steel industries to address the employment issue since the 2008 global financial crisis. Since the inauguration of U.S. President Donald Trump and Brexit, in particular, trade protectionism has become common around the world.
Trade protectionism, which started in the U.S. after Trump took office, has spread around the world, giving rise to more import restrictions on South Korean steel products. The Middle East, which had not imposed restrictions on imported steel from Korea, began to take safeguard actions this month, while the EU is considering a similar action. Last year, South Korea exported steel products worth three-point-six-one billion US dollars to the EU, which is Korea’s fourth-largest steel export market, following China, the U.S. and Japan. It is easy to imagine that restrictive measures by the EU will add to the Korean steel industry’s difficulty. Worse yet, trade protectionism that started in the steel sector may spread to other industries. Professor Choi continues.
The automobile industry could be hit by protectionist trade. Trump has said that U.S. cars sold in Europe and China are subject to duties of ten percent and 25 percent, respectively, while the U.S. imposes just two-point-five percent of import tariffs. Pointing out the imbalance, he suggested that other countries lower their import tariffs or the U.S. raise its import duties. South Korean semiconductors might also see a similar situation. As steel is t