[The Editors' Verdict] Sticking to WTO Rules Alone Won't Revive Advanced Industries

It does not seem as easy as expected for the semiconductor industry to receive government subsidies. At the end of last month, the issue of subsidy support to enhance the competitiveness of the semiconductor industry was discussed at the National Advanced Strategic Industry Committee chaired by Prime Minister Han Duck-soo, but no conclusion was reached despite intense discussions among the attendees. It was reported that the global competition for investment subsidies was mentioned at this meeting, and it was decided to continuously review the matter based on that. However, it was merely a review, and there was a sense of a temperature gap compared to the earnestness of the semiconductor industry, including Samsung Electronics and SK Hynix.

The Korean government appears particularly hesitant to provide subsidies for advanced industries. The United States is pouring 71 trillion won into the semiconductor industry by 2027, Japan 35 trillion won, and China 63 trillion won. The global semiconductor industry is literally engaged in a 'war of money.' Korea remains a 'subsidy-free zone.'

The hesitation to provide subsidies is believed to be more influenced by concerns over World Trade Organization (WTO) regulations than controversies over preferential treatment for large corporations. The WTO, which aims for free trade among countries, prohibits subsidies to specific industries or companies, and our government is said to be highly sensitive to this.

According to the 'Agreement on Subsidies and Countervailing Measures (WTO Korean Agreement)' published on the Ministry of Foreign Affairs website, countries that provide subsidies may face countermeasures from affected countries. If subsidies are given to specific industries or companies causing negative impacts on industries in other countries, countervailing duties can be imposed. This is known as the 'actionable subsidy' rule. According to the regulations, if our government supports domestic industries with subsidies, it could face tariffs or lawsuits from countries like the United States. Even if the U.S. Department of Commerce provides funds to Intel, the U.S. Trade Representative (USTR) could challenge our government’s subsidies. This is because trade disputes are considered separate from subsidy support given by competing semiconductor countries to their own industries. Of course, we could also raise issues in return.

There is also concern that subsidies could become a pretext for trade retaliation if a semiconductor supply glut occurs due to the cyclical nature of the industry.

The fact that the subsidy recipients are domestic companies such as Samsung Electronics and SK Hynix is also an obstacle. It can be regarded as support for specific industries or domestic companies. The U.S. is preparing to provide subsidies to Samsung Electronics and Taiwan’s TSMC, and the Japanese government has decided to provide subsidies to TSMC. The government argues that if only domestic companies are supported and harm is caused to other countries, we could be at a disadvantage when criticized.

Korea has indeed benefited from free trade since the launch of the WTO system in 1995. Unlike the General Agreement on Tariffs and Trade (GATT), the WTO established an appellate body for dispute resolution, allowing countries harmed by subsidies to file complaints.

However, the situation has changed now. The WTO’s influence has weakened, and countries are strengthening protectionism. In a situation where competing countries are engaged in a subsidy giveaway competition, appealing to the WTO after suffering damage from the effects of subsidies is a case of 'closing the stable door after the horse has bolted.'

The WTO’s most significant feature, the appellate body, is currently paralyzed. Although member countries’ ministers agreed to normalize the appellate body by the end of this year, there has been no progress. The terms of all seven appellate body members have expired, and no successors have been appointed. We can only hope that adherence to WTO regulations does not cause us to miss the opportunity to support our industries.

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