US-Japan Steel Agreement Turns Out to Be a "Bitter Apricot"... "If Korea Insists on Expanding Quotas, US Export Volume May Actually Decrease"

If Following the US-Japan Approach Instead of the US-EU Negotiation Standard, South Korea's Export Quota May Actually Decrease
Steel Industry: "Should Demand Flexibility of Existing Quota System Instead of Full Renegotiation Including Quota Expansion"
Government Also Considering Plan B...Pursuing Exclusion of Certain Product Quotas

[Asia Economy Sejong=Reporter Kwon Haeyoung] An analysis has emerged that if the Korean government undertakes a full renegotiation with the United States on the 'Steel Section 232', the duty-free steel export volume to the U.S. could actually decrease by about 250,000 tons annually. This estimate is based on the U.S.-Japan steel agreement reached earlier this year. Accordingly, there is growing concern that if Korea hastily pursues steel negotiations with the U.S., its export conditions could deteriorate like Japan’s. The government is actively considering shifting its strategy from the existing stance of expanding export quotas to a 'Plan B' that demands 'flexibility in the quota system.'

According to the government and steel industry on the 16th, if the Korea-U.S. governments initiate steel renegotiations, the volume of steel exports from domestic companies to the U.S. is expected to vary significantly depending on whether the negotiation method follows that of the EU or Japan, with whom the U.S. has previously concluded agreements.

Korean steel companies currently can export 2.63 million tons duty-free to the U.S., which is 70% of the average annual export volume from 2015 to 2017. Applying the U.S.-EU export negotiation terms (75% of the average annual export volume from 2015 to 2017) would increase this by 180,000 tons to 2.81 million tons. However, following the U.S.-Japan negotiation terms (100% of the average annual export volume from 2018 to 2019) would reduce the current volume by 250,000 tons to 2.38 million tons.

A steel industry official said, "When the U.S. began steel negotiations with Japan, it broke the initial expectation that it would propose conditions similar to those with the EU and instead concluded negotiations under terms quite unfavorable to Japan. If the U.S. applies the conditions it set for Japan rather than the EU to us, the export quota could decrease, potentially causing unnecessary trouble."

Accordingly, voices within the industry are growing that it is more realistic for the government to request improvements to the existing quota system from the U.S. rather than an expansion of export quotas. The aim is to achieve quota system flexibility similar to the EU’s, such as ▲ excluding certain product volumes from the annual quota ▲ allowing rollover of unused quarterly quotas ▲ establishing an obligation to consult upon Korea’s request.

For example, in the case of the EU, in addition to an annual export quota of 3.3 million tons to the U.S., it can export an additional 1.1 million tons annually of 'excluded products.' Excluded products refer to steel items that the U.S. cannot meet demand for solely through domestic supply and thus allows imports. Currently, when Korean companies export excluded products, the volume is deducted from the annual quota, but in the EU’s case, it is not deducted from the quota. As a result, while Korea currently exports 40,000 tons (1.5% of the annual quota) of excluded products to the U.S., the EU exports 1.1 million tons (33.3% of the quota) additionally, separate from the quota. Ultimately, even improving the operational method to exclude excluded product volumes from the quota like the EU would effectively increase Korea’s steel export quota to the U.S. significantly.

The government is also expected to revise its negotiation strategy with the U.S. to prioritize quota system flexibility, accepting the industry’s demands. This approach is less burdensome for the government than demanding a full renegotiation of Steel Section 232, and the opposition from U.S. steel companies is also expected to be less intense than before, increasing the likelihood of successful negotiations. Especially with the U.S. midterm elections approaching in November, the government views the first half of the year as the 'golden time' for Korea-U.S. steel negotiations and plans to devote all its efforts accordingly.

An official from the Ministry of Trade, Industry and Energy said, "The domestic steel industry has long advocated for a full renegotiation of Steel Section 232, but many variables have emerged due to the U.S.-Japan steel agreement. The government will also fully consider this situation and participate in negotiations with the U.S. accordingly."

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