Hankyung Research Institute "Concerns Over Decline in South Korea's Exports to the US Due to US Climate Change Policies"

Report Presentation on the Biden Administration's Climate Change Policy Framework and Responses of Our Companies

Data provided by Korea Economic Research Institute

[Asia Economy Reporter Kim Heung-soon] Analysis suggests that the climate change response policy of the U.S. Joe Biden administration reflects a shift in tone aimed at protecting domestic industries and jobs while curbing imports of products with low carbon efficiency. Accordingly, it is pointed out that government efforts such as deregulation are necessary to strengthen South Korea's carbon competitiveness.

The Korea Economic Research Institute under the Federation of Korean Industries released a report titled "The Tone of the Biden Administration's Climate Change Response Policy and the Response of Our Companies," analyzed by Professor Kim Young-duk of Pusan National University, on the 27th. According to the report, the U.S. is expected to promote strengthening its external competitiveness by leveraging its advantage in carbon competitiveness.

The U.S. holds an advantage in carbon efficiency measured by carbon intensity compared to major countries worldwide, and it is anticipated that this will be used as a pressure tool against China. The report emphasizes that if the U.S. implements carbon border adjustment policies such as imposing carbon tariffs on imported products, it is highly likely to negatively impact exports to the U.S. not only from China but also from South Korea.

Industries with high greenhouse gas emission shares, such as primary metals, chemicals, and refining, are expected to suffer significant damage in exports to the U.S. The report forecasts that Korean companies may increase direct investment in the U.S. in anticipation of reduced exports of products with high carbon intensity and the U.S.'s policy focusing on domestic materials and components.

Representative investment fields include eco-friendly automobiles, a key strategic industry of the U.S., along with automobile parts, semiconductors, and secondary batteries. Accordingly, it is pointed out that Korean companies need to move beyond passive carbon reduction and actively strengthen their carbon competitiveness.

However, the report also forecasts that the U.S. policy shift could act as an opportunity for the domestic electric vehicle-related industry. Since the U.S. is judged to be lagging in the electric vehicle sector, it is highly likely to support domestic production of parts including secondary batteries and implement policies to expand electric vehicle adoption. Understanding this trend, it is analyzed that Korean companies need to actively pursue business diversification such as transitioning to electric vehicle parts.

Furthermore, the report emphasizes that there are limits to strengthening carbon competitiveness through corporate efforts alone and that the government must actively support these efforts. Deregulation of the electricity market is a representative example.

Professor Kim Young-duk stated, "The change in the U.S. greenhouse gas response policy will act as a burden on domestic export companies with high carbon intensity," and added, "Companies have no choice but to respond by expanding direct investment in the U.S. instead of exports to the U.S." Regarding the impact on domestic industries due to the shift to investment in the U.S., he added, "Efforts to secure open markets such as expanding Free Trade Agreements (FTAs) and attracting foreign direct investment are simultaneously necessary."

This content was produced with the assistance of AI translation services.