[Subsidies Tied Up by WTO]③ Korea's Multiple WTO Dispute Settlement Wins Now Rendered Ineffective

Government's 'Close Relationship' with WTO Awareness Background
Many Cases of Receiving WTO Assistance in Major Disputes
Role Reduced Amid Strengthened Protectionism
Number of Dispute Procedure Referrals Also Declining

There is an analysis that the reason our government cannot take the ‘bold step’ of providing semiconductor subsidies even at the risk of violating World Trade Organization (WTO) agreements is due to the close relationship between Korea and the WTO.

[Image source=Reuters Yonhap News]

According to industry sources on the 4th, the government is reportedly concerned not only about the immediate ‘risk of litigation’ that could arise from providing subsidies but also about the need to receive assistance from the WTO in potential future trade disputes, which makes it difficult to easily decide on subsidy payments.

WTO Dispute Settlement Body (DSB) Filing Procedure. Image=Asia Economy DB

Korea has experience in finding an escape route through the WTO’s ‘dispute settlement procedures’ whenever significant trade disputes arise. In this litigation-based procedure, our government has won several times. A representative case is when the U.S. imposed anti-dumping duties on our washing machines starting in 2013, and Korea filed a complaint, ultimately winning in September 2016. When the U.S. failed to comply with the ruling, our government requested the WTO in January 2018 to suspend concessions worth $711 million annually (approximately 799 billion KRW) against the U.S., which is a measure to reimpose tariffs that had been lowered or removed on certain products. In December 2019, Korea received a decision allowing it to suspend concessions worth about 95 billion KRW annually on U.S. imports. In the final ruling (April 2019) of the case where Japan filed a complaint with the WTO against Korea for banning seafood imports from Fukushima and eight surrounding prefectures and requiring additional inspections if radioactive cesium was detected, the WTO ruled in favor of Korea. In the Korea-Japan pneumatic valve tariff case in September 2019, the WTO accepted Korea’s claims on 8 out of 9 disputed issues. Korea also won a $1.6 billion tariff dispute against the U.S. in January 2021. The WTO ruled that eight tariffs imposed by the U.S. on Korean products under the ‘Adverse Facts Available (AFA)’ provision were unreasonable. In September 2019, Korea filed a WTO complaint against Japan’s export restrictions on three key semiconductor and display materials exported to Korea but withdrew it in March last year as Korea-Japan relations improved.

However, since 2018, due to the U.S.-China trade conflict, the global market has shown a strong tendency toward ‘protectionism,’ rendering the WTO’s functions and roles, which promote free trade, largely ineffective. The number of dispute cases referred has gradually decreased from 38 in 2018, 20 in 2019, and 5 in 2020, to only one case from January to April this year. This means that fewer than ten countries now file complaints with the WTO even when disputes arise. China most recently filed a WTO complaint against the U.S. on the 26th of last month, alleging that the U.S. discriminately implemented electric vehicle subsidies under the Inflation Reduction Act (IRA). However, the U.S. continues to pursue large-scale subsidy policies. Globally, there is little expectation that the WTO will be able to control this. If the WTO’s dysfunction continues, voices from the industry pressuring the government to provide subsidies are expected to grow even louder.

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