KIEP Director Kim Heung-jong: "Carbon Tax Expected to Impact SMEs... Need to Strengthen Response Capabilities in Steel and Others"

Special Lecture at the '2021 Baekdu Forum' on the 12th
"SME CBAM Direct Exports of 2.9 Billion USD"
Policy Proposals for 'Post-Pandemic Trade'

Kim Heung-jong, President of the Korea Institute for International Economic Policy

[Asia Economy Reporter Kim Bo-kyung] Kim Heung-jong, President of the Korea Institute for International Economic Policy, stated on the 12th that the European Union's (EU) Carbon Border Adjustment Mechanism (CBAM) is expected to impact small and medium-sized enterprises (SMEs) that export directly to the EU or supply export companies.

He emphasized the need to strengthen the capacity to respond to CBAM, as the proportion of SMEs directly exporting steel products to the EU reaches 59.9%.

On the same day, Kim gave a lecture on "Trade Environment in the Post-Pandemic Era" at the '2021 Baekdu Forum' hosted by the Korea Federation of SMEs at Lahan Select Gyeongju.

CBAM, announced by the EU in July, is a system that imposes taxes based on the amount of carbon emitted during product manufacturing. It applies to six industries: cement, electricity, fertilizer, steel, steel products, and aluminum.

Kim explained that as of 2019, South Korea's exports to the EU amounted to $47.2 billion, of which exports of CBAM-targeted items such as steel, steel products, and aluminum totaled $2.9 billion.

Among CBAM items, direct exports by SMEs amounted to $610 million. Specifically, steel ($370 million, 15% SME share of total exports) and steel products ($237 million, 59.9%) had high proportions, followed by aluminum ($38 million, 18.8%) and fertilizer ($1 million, 53.4%).

Kim said, "Although the direct export share of CBAM items is low, considering indirect exports, the impact range on SMEs expands," adding, "Damage is expected to SMEs that export directly or supply export companies."

In particular, he cited an opinion from a Korea Iron & Steel Association official that, except for POSCO, other small and medium-sized steel companies currently have no response strategies for CBAM.

Meanwhile, Kim expressed the opinion that in the post-pandemic era, it is necessary to respond to the EU's move to introduce a digital tax for SMEs' overseas expansion using data.

He mentioned that rapid digital transformation makes the use of online platforms essential for exporting SMEs and can be a new growth opportunity.

He suggested, "There is a need to establish representative statistics on the online export status and policy demands of SMEs," and "A solution channel for issues related to SMEs' online exports should also be prepared."

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