[Economy Pulse] Where Is the 'European Dream' Heading?

Europe has long promoted values that humanity should aspire to, such as liberal political and economic integration, multicultural acceptance, globalism, and a spirit of community that emphasizes peace and harmony. Futurist Jeremy Rifkin predicted in his 2004 book, "The European Dream," that the launch and development of the European Union (EU) would realize the European Dream.

European countries, drawing on their experiences from World War I, World War II, and the US-Soviet Cold War, were the first in the world to establish a philosophical foundation that values mutual recognition, the maintenance of democracy and peace, cooperation and regional economic integration, and environmental protection, along with a civil society that advocates these principles. For these reasons, the Korean public generally holds a favorable view of European countries. In addition, Korea has maintained relatively smooth trade relations with Europe compared to the United States.

However, over the past decade, the EU has frequently implemented discriminatory measures against non-European countries. While outwardly advocating rational and liberal trade policies, in practice, the EU has often adopted highly protectionist policies or displayed double standards. Although these actions are justified on philosophical grounds, their real purpose is to protect domestic industries.

The EU, like the United States, now places the concept of economic security at the forefront. While emphasizing the single market and fair competition within the bloc, it actively utilizes regulations and trade remedies focused on its own interests in external markets.

Recently, the EU has been practicing regulatory protectionism. A prime example is the Carbon Border Adjustment Mechanism (CBAM), which unilaterally imposes the cost of carbon emissions contained in imported goods. No matter how much it is justified as a response to global warming, it is undoubtedly a new tariff barrier designed to protect companies within the EU. In recent years, the EU has introduced numerous regulatory protectionist measures, including "ecodesign," "perfluorinated compound regulations," the "Battery Act," the "Critical Raw Materials Act," "digital platform regulations," the "Artificial Intelligence Act," and "foreign subsidy measures."

Although the EU declares itself a leader in free trade, fair trade order, and sustainable development, in the actual implementation of policies and agreements, it repeatedly exposes practical discrepancies such as protectionism, complicated procedures, double standards, and reduced effectiveness. Moreover, the EU, which once criticized the extreme America-first trade policies of the Donald Trump administration, is now strengthening protectionism to a level similar to that of the United States.

Earlier this month, the European Commission implemented an emergency safeguard measure by reducing the steel import quota (duty-free allocation) by 47% to 18.3 million tons and raising the tariff rate on steel exceeding the quota from the current 25% to 50%. Although this measure must be finalized with the consent of the European Parliament and member states, the domestic steel industry is experiencing an unprecedented sense of crisis as the EU has followed the United States (50%) in raising steel tariffs.

According to international trade rules, emergency safeguard measures have a set expiration date. This quota is scheduled to end in June next year. The EU is the largest export market for Korea's steel industry. The quota reductions and tariff increases by the United States and the EU are bound to inflict severe damage on Korea's steel industry. Similar measures may be imposed on other products in the future.

When it comes to steel, Korea has not benefited at all from the Free Trade Agreement (FTA) with the EU, which took effect in 2011. While the World Trade Organization (WTO) and FTAs allow for the invocation of safeguards, the country imposing them is obligated to provide compensation to the exporting country. This puts the EU at a disadvantage. Rather than focusing solely on quota negotiations with the EU, Korean trade authorities should raise the issue of the EU's unfair measures on the international stage. Korea should also cooperate with countries such as Turkiye and China, which have higher export volumes than Korea, to challenge the unfairness of the EU's actions. In addition, efforts should be made to block EU-level decisions by consulting with the governments of countries such as the Czech Republic and Poland, where Korean steel-consuming companies have operations. The prompt enactment of the "K-Steel Act," which supports the entire domestic steel industry, is also necessary.

Jung Ingkyo, Professor of International Trade at Inha University (former Head of Trade Negotiations)

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