EU Raising 'Trade Barriers', Pushing Immediate Retaliation Bill... Impact on Korean Companies?

Broad Response Measures to Protect EU Interests Included
"Korean Companies May Face Unexpected Impacts on Supply Chains"

Export and import cargo are piled up at Busan Port Sinsundae Pier./Busan Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Lee Hyeyoung] The European Union (EU) is pushing for legislation that would allow immediate retaliatory measures in response to trade threats from third countries to protect its member states. If the legislation is enacted, South Korean companies with a high export ratio could face a chain reaction of impacts, including disruptions to supply chains, necessitating caution.

According to a report released on the 9th by the Brussels office of the Korea International Trade Association, the EU Commission's recently announced "Trade Threat Response Regulation" is analyzed to include broad countermeasures against countries that pose economic threats to the EU and its member states.

The scope of possible sanctions covers goods and services, foreign direct investment, public procurement, financial services, and effectively all sectors. This aims to maximize the deterrent effect against economic threats and to respond to actual threats on a case-by-case basis.

The EU has also significantly relaxed the decision-making conditions. By lowering the initial sanction implementation threshold from unanimity to a qualified majority vote, rapid decision-making is enabled when a trade threat is deemed to have occurred. The legislation also includes provisions allowing the EU Commission to immediately implement retaliatory measures without a separate voting procedure in cases deemed urgent.

Additionally, the measures can be applied not only to third-country governments but also to related individuals and organizations, indicating the nature of "economic sanctions." This is a major adjustment compared to the current EU trade policy, which does not include economic sanctions and requires unanimity in the EU Council to adopt sanctions.

The report analyzes that, amid escalating geopolitical threats and increasing trade and economic pressure from various countries, the EU's trade policy direction may change in the future. The regulation could be applied and responses taken not only against China or Russia but also traditional allies such as the United States, the United Kingdom, and Japan.

South Korean companies are also expected to be inevitably affected in the long term if the regulation is applied. If exports from South Korean companies proceed through third countries exerting economic threats to the EU, customs clearance refusals and other measures could be taken, potentially hindering overall business operations.

The report states that the legislation was prepared as the need for an independent EU-level resolution mechanism for trade threats emerged amid the paralysis of the World Trade Organization (WTO) appellate body, which has eliminated methods for resolving trade disputes between countries. For example, the United States has threatened with special tariffs on member states and companies regarding Europe's digital tax, and China is currently imposing trade retaliation on Lithuania, which is in conflict over the Taiwan issue, but the EU has no appropriate measures to respond.

However, the report mentions that since the legislation will be finalized through a tripartite agreement among the EU Commission, the European Parliament, and the EU Council, some provisions, such as granting the EU Commission unilateral authority for measures, may be revised. The final agreement is expected to be announced around the end of the year.

Joo Bitna, head of the Korea International Trade Association's Brussels office, emphasized, "The possibility of South Korea facing retaliatory measures from the EU is low, but since global supply chains are intricately connected, we cannot rule out the possibility that our export companies may be unexpectedly affected. It is necessary to closely monitor the EU's legislative trends on this measure and, after the legislation is completed, continuously monitor the countries targeted by EU retaliatory measures to respond proactively."

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