Seoul refutes excess capacity, forced labor allegations in letters to USTR

Trade Minister Yeo Han-koo, right, talks with United States Trade Representative Jamieson Greer during the World Trade Organization's 14th Ministerial Conference in Cameroon, March 27. Courtesy of Ministry of Trade, Industry and Resources

Seoul refuted Washington’s claims of structural excess capacity in Korea’s manufacturing sector and failure to ban exports of goods made with forced labor, in its comments on the proposed U.S. investigations under Section 301 of the Trade Act of 1974.

In documents submitted shortly before the deadline Wednesday (local time), the Ministry of Trade, Industry and Resources rejected the allegations raised by the Office of the United States Trade Representative (USTR).

While highlighting Korea’s market-based economic structure, efforts to address excess capacity and the complementary nature of Korean and U.S. industries, the ministry said Korea has consistently pursued the elimination of forced labor.

“The 2025 Global Forum on Steel Excess Capacity Ministerial Statement notes that Korea does not contribute to global steel excess capacity through nonmarket policies, but is rather affected by such excess capacity,” the document on excess capacity reads.

“In its analysis of the semiconductor industry, the OECD recognized Korea’s manufacturing sector as being driven by private enterprises operating within a market economy framework, rather than relying on government subsidies.”

The ongoing restructuring of the petrochemical industry to address global oversupply was also cited as part of efforts to tackle excess capacity.

Regarding Korea-U.S. interdependence, the ministry said Korean shipbuilders are investing to help revitalize U.S. shipyards and strengthen naval capabilities.

“It is necessary to consider the distinctive nature of Korea’s recent trade surplus with the U.S., which has been driven by increased exports of essential equipment and components following a rise in foreign direct investment into the U.S., as well as by the expansion of high-value-added exports resulting from technology-intensive investments,” the document reads.

Regarding the forced labor issue, the ministry said Korea has enacted comprehensive domestic legislation to eradicate forced labor practices.

“The Korean government has actively implemented policies to encourage companies to exclude goods produced with forced labor from their supply chains,” another document reads.

The ministry asked the USTR to conclude that its action against Korea is neither appropriate nor necessary.

Korea’s business associations and companies operating in the U.S., including Hyundai Motor Group, also submitted comments against the excess capacity claim.

“Automotive production in Korea is undertaken by privately managed enterprises operating in response to global market demand, rather than reflecting persistent state-directed overproduction dynamics,” Drew Ferguson, senior vice president for government affairs at Hyundai Motor Group, said in the carmaker’s letter to USTR Jamieson Greer.

After announcing its decision last month to launch investigations into Korea and other trade partners under Section 301 — which allows the U.S. to impose unlimited tariffs in retaliation against foreign practices it considers unfair or harmful to American commerce — the USTR asked affected governments to submit comments by April 15, with plans to start public hearings May 5.

The Korean government has downplayed concerns over potential fallout, describing the move as a forewarned follow-up action after U.S. President Donald Trump’s so-called “reciprocal” tariffs were ruled unconstitutional.

The trade ministry said tariffs on Korean goods would likely return to 15 percent — the level agreed upon last November — once the investigations conclude. Currently, a 10 percent global tariff is applied to Korean products under a new imposition following the U.S. Supreme Court ruling.