[New Trade Barrier Carbon Tax②] EU-Origin Protectionism Strikes China and Russia Directly... Triggers Vicious Cycle of Retaliation

EU Pushes Ahead Without WTO Member Consensus... WTO 'National Treatment' Principle Violated
Significant Impact on Emerging Industrial Countries Like China and Russia, Raising Concerns Over Retaliatory Tariffs and Trade War
Our Government Moderates Response Rather Than Strong Action... "Need to Increase Pressure on EU and Support Industry"

[Sejong=Asia Economy Reporter Kwon Haeyoung] The European Union (EU) is set to unveil its Carbon Border Adjustment Mechanism (CBAM) on the 14th, which is raising concerns as a potential starting point for a 'new trade war' between developed and developing countries. The EU's carbon border tax is expected to be imposed not only on South Korea, classified as an advanced industrial country, but also on imports from China and India, known as the 'world's factories,' serving as a protectionist measure for industries within the EU. This could provoke retaliatory actions from these industrial nations. Domestically, the steel industry is anticipated to suffer significant damage, prompting calls for the government to escalate its response level against the EU. Some critics argue that while carbon reduction is the right path, certain domestic environmentalists may be excessively aligning with the developed countries' 'protectionist' measures.

◆ "EU needs WTO consultations if introducing carbon tariffs... Violates national treatment principle"＝ The biggest issue if the carbon border tax is introduced is whether the EU's trade partners will accept it. Professor Jeong In-gyo of Inha University's Department of International Trade said on the 13th, "For the EU to implement CBAM, it must go through discussions under the WTO framework to establish a new tariff system with member countries," adding, "However, the EU is showing a 'protectionist' behavior by unilaterally pushing carbon tariffs without global consensus among countries."

CBAM is a system that investigates the carbon content of products imported into the EU and imposes tariffs on the excess carbon emissions compared to domestic products. This system will be introduced in 2023 and fully implemented by 2026.

Experts believe that the EU's carbon tariff is highly likely to violate the WTO's national treatment principle, which prohibits discrimination between domestic and foreign products. The methods of carbon measurement and the use of carbon tariff revenues could also become points of contention. In this context, the EU's unilateral approach is seen as exploiting the dysfunction of the WTO dispute mechanism, raising concerns that it could trigger trade retaliation from developing countries such as China, India, and Russia.

Professor Jeong evaluated, "The EU's imposition of carbon tariffs violates the WTO national treatment principle and could lead to litigation, but the EU is pushing the carbon tariffs knowing that the WTO appellate mechanism will not function properly." He added, "Ultimately, other countries will choose trade retaliation over WTO litigation, which could become a pretext for a new trade war."

◆ China and Russia to face major shocks... Criticism of "our government's lukewarm response"＝ The government is exploring various measures to address the industrial impact of the EU's CBAM introduction. However, it is currently taking a cautious approach rather than a strong response. The regulatory level of CBAM may be more relaxed than initially expected, and the impact on late-industrializing countries such as China, India, and Russia is anticipated to be much greater than on South Korea, leading to a wait-and-see stance. There is also a calculation that the EU's carbon tariffs could result in domestic companies gaining market share in Europe at the expense of China, Russia, and India.

An official from the Ministry of Trade, Industry and Energy said, "Countries like China and Russia, which will face greater industrial shocks than us, may file complaints with the WTO or engage in retaliatory trade against the EU," adding, "We plan to decide on the level of response after the detailed CBAM plan is disclosed and we observe other countries' moves."

Some voices criticize the government's perception as somewhat complacent. In the domestic steel industry, carbon tariffs could impose costs exceeding 10% of export value, so there are opinions that the government should actively raise issues to alleviate the industry's burden.

There is also an assessment that if the government does not strongly respond to carbon tariffs, it may inadvertently provide an opportunity for some domestic environmentalists to raise their voices. Without considering the realities of the domestic industry, carbon tariffs?an EU protectionist trade tool?could be used as leverage to pressure Korean companies to accelerate their carbon reduction efforts. In the National Assembly, a 'Carbon Tax Act (proposed by Representative Yong Hye-in of the Basic Income Party)' has even been introduced, proposing to distribute basic income to all citizens using revenue from carbon taxes imposed on companies.

◆ EU building carbon barriers, investing 13 trillion won in regional companies＝ The EU has already begun erecting carbon barriers under the pretext of the carbon border tax. It established the EU Innovation Fund, pledging to invest 10 billion euros (approximately 13.6 trillion won) by 2030 to commercialize and scale up carbon reduction technologies among regional companies. The Australian government is also investing 18 billion Australian dollars (about 15.5 trillion won) by 2030 in developing low-carbon emission technologies for companies. In contrast, South Korea's Ministry of Industry and Energy has not even separately identified the size of its carbon-neutral budget, and the scale of support remains minimal.

Within the industry, there are calls for the government to establish a response logic that the EU's carbon border tax constitutes double regulation and violates WTO rules, to secure exemptions from application, and to internally strengthen support for the industry's carbon reduction technology development.

A business sector official said, "In response to regulatory environment changes in major countries such as the United States and Europe, the government must prepare national-level countermeasures and strengthen support for companies to at least the level of competitors or competing countries."

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