Korean companies raise voices against European Union

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By Park Jae-hyuk

The European Union's (EU) tendency of tightening industrial regulations against non-EU companies has been drawing backlash from Korean businesspeople, who view the tougher rules as trade barriers designed to protect European markets, according to the Korea International Trade Association (KITA), Wednesday.

It said Korean companies joined foreign businesses in submitting a statement expressing their concerns about the European Commission's proposed regulation on foreign subsidies. The proposal is mainly intended to restrict the entry of foreign firms into the European market, if they were subsidized by non-EU governments.

Including the Korea Business Association Europe, the signatories are advocacy organizations representing companies from the U.S., Japan, Australia and India. The Computer & Communications Industry Association, which represents the ICT industries, also joined them.

“We are concerned that the proposal will have unintended consequences for multinationals, including EU-headquartered companies, who are most likely to engage in M&As and public procurement activities liable to trigger notification requirements under the proposal,” the signatories said in the statement. “The future regulation should be balanced and proportionate as it could otherwise impair fair competition.”

Last July, KITA told the European Commission about Korean companies' concerns over the proposed regulation, as it seeks to force foreign firms to report subsidies they have received from non-EU governments over the past three years and to get prior permission from EU regulators when they want to participate in sizable M&As and public procurement activities in the bloc.

If foreign firms fail to submit correct subsidy data, they can be slapped with fines equivalent to 10 percent of their annual sales, according to the proposed regulation.

“Companies may fear that the wide range of support measures received in third countries globally could not be accounted for in full compliance, and this could expose them to high fines,” the signatories said.

KITA said it will continue to make efforts to influence the EU regulators to take into account opinions from Korean companies, when implementing trade regulations.

Earlier this year, Korea Development Bank (KDB) Chairman Lee Dong-gull criticized the EU for being “extremely selfish and only prioritizing the interests of its member countries,” after the organization decided not to approve Hyundai Heavy Industries' (HHI) proposed acquisition of Daewoo Shipbuilding & Marine Engineering (DSME).

“Because it is critical to make sure that Korean industries are not easily pushed around by the EU, I personally hope HHI will file lawsuits to ask for compensation and cancellation of the disapproval,” the KDB chairman said in a press conference, Jan. 27.

The Federation of Korean Industries (FKI) also told EU Ambassador to Korea Maria Castillo Fernandez last month that Korean companies are concerned about the Carbon Border Adjustment Mechanism (CBAM), which is a proposed tariff on carbon-intensive products.

“There are concerns that the CBAM could be a new trade barrier or an additional burden on Korean companies exporting to the EU members,” FKI Vice Chairman Kwon Tae-shin said at that time.

The business lobby group sent a letter to the European Commission last July to ask for the inclusion of Korea in countries to be exempt from the carbon tariff.