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Shipbuilding partnership seen as bargaining chip in tariff talks
U.S. President Donald Trump speaks during a visit to Fincantieri Marinette Marine shipyard in Marinette, Wis., in this June 2020 photo. AP-Yonhap
By Park Jae-hyuk
Trump maintains keen interest in Korea's ability to build vessels
The government has expressed its intention to leverage potential cooperation with the United States in the shipbuilding industry as part of its negotiations with Washington to lower the 25 percent "reciprocal tariff."
Calling the sector a key bargaining chip in ongoing trade talks, Industry Minister Ahn Duk-geun highlighted the strong interest the Donald Trump administration has shown in a potential shipbuilding partnership.
"U.S. shipbuilding capabilities have been in continuous decline since World War II, which is why the country is placing high expectations on Korea's technology and manufacturing capacity," Ahn told lawmakers during a meeting at the National Assembly on Wednesday, the day that U.S. reciprocal tariffs took effect.
His remarks came a day after a phone call between the leaders of Korea and the U.S.
According to the Prime Minister's Office, shipbuilding was one of the three key areas in which acting President Han Duck-soo conveyed Korea's willingness to cooperate with the U.S.
Trump also mentioned shipbuilding as one of the topics discussed with Han in a post on his social media account following the conversation, his first with a Korean leader since taking office in January.
After their discussion, stocks of Korean shipbuilders rose temporarily on Wednesday morning.
Although the two leaders did not reveal specific details regarding the potential partnership, the U.S. has been expected to use Korea’s expertise in building both naval and commercial vessels to counter China's growing dominance in the global marine industry.
Trump reportedly raised the need for close cooperation with Korea on ship maintenance, repair and overhaul (MRO), as well as on ship exports, when he talked with then-President Yoon Suk Yeol on the phone last November.
“The U.S. government has shown strong interest in expanding MRO cooperation to include combat ships, and the White House has set up a task force to coordinate shipbuilding discussions with us,” Ahn said.
USNS Wally Schirra, a replenishment vessel for the U.S. Navy, sets sail in this March photo, after Hanwha Ocean repaired the ship at the company's shipyard on Geoje Island, South Gyeongsang Province. Courtesy of Hanwha Ocean
Trade Minister Cheong In-kyo also told reporters at Washington Dulles International Airport on Tuesday (local time) that shipbuilding would be on the agenda for his upcoming meeting with U.S. Trade Representative Jamieson Greer.
“Shipbuilding is one of the areas the U.S. is most interested in,” Cheong said.
To help domestic shipbuilders seize this opportunity, the government also announced plans to expand financial support for second-tier companies such as Daehan Shipbuilding, K Shipbuilding and HJ Shipbuilding & Construction.
These mid-sized shipbuilders have recently begun seeking contracts to service U.S. Navy vessels, following in the footsteps of industry giants like HD Hyundai Heavy Industries and Hanwha Ocean.
As part of the plan, more financial institutions will be encouraged to issue refund guarantees for these mid-sized companies. A refund guarantee is a financial safeguard ensuring a buyer receives compensation if a shipbuilder fails to deliver a vessel as agreed. The issuing bank guarantees repayment of the buyer’s pre-delivery payments.
“We will support the expansion of refund guarantee issuance for mid-sized shipbuilders so that the recent shipbuilding industry boom can help them secure more orders,” Deputy Prime Minister and Finance Minister Choi Sang-mok said.
However, it remains uncertain whether Korea will agree to the U.S. request to import liquefied natural gas (LNG) from Alaska in return for reduced tariff rates.
Ahn noted that further negotiations are necessary to evaluate the profitability of LNG imports.
The minister emphasized the importance of the Korea-U.S. Free Trade Agreement, noting that Korea avoided higher tariffs, unlike Japan and European Union members, which were subjected to an additional 1.4 percent most favored nation tariff.