More dark clouds on horizon

The Korea Times

The Korea Times

Opinion

Sun, December 10, 2023 | 04:18

Editorial

More dark clouds on horizon

Posted : 2023-05-07 16:40

Updated : 2023-05-07 16:40

Joint efforts essential to tackle US move for new bill

More dark clouds are gathering, putting domestic companies on alert. The U.S. is enacting a new law in the footsteps of the notorious CHIPS and Science Act. The new act targets China again, yet with measurable fallout on Korean firms. The new act will also be disappointing for Korean businesses as it will come amid an amicable atmosphere between the two allies following President Yoon Suk Yeol's seemingly successful state visit to the U.S. and summit with U.S. President Joe Biden.

The U.S. Congress is seeking to introduce the new bill designed to effectively cope with possible competition with China. The bill, dubbed "China Competition 2.0," details of which have yet to be unveiled, will feature a wide range of measures to contain China in terms of investment restrictions, economic sanctions as well as export curbs.

"There is no reason our two parties here in the Congress and the Senate can't come together and send a strong message to the Chinese government that we're united in this pressing national security effort and we are committed to maintaining America's lead in the future," Senate majority leader Chuck Schumer (D-N.Y.) told a press conference Wednesday. Schumer added, "The Xi regime is working every day to catch up and surpass the U.S." referring to Chinese leader Xi Jinping.

The previous CHIPS and Science Act was meant to prevent global semiconductor companies from investing in China in return for offering them with a huge amount of subsidies. Yet the incoming bill covers diverse key industrial areas, such as bio, batteries and energy beyond semiconductors.

The bill seeks to strengthen restrictions on exports and investments into China to prohibit possible transfers of state-of-the-art technologies. This means the U.S. is renewing efforts to undermine China's stance in the global supply channels of high tech industries.

Such a move also imposes growing challenges upon Korean companies as they maintain close relations with China in the areas of chips and batteries. This will also pose a diplomatic and economic setback for Korea.

The Korean companies have been struggling due to a package of measures taken by the U.S., such as the CHIPS and Science Act and Inflation Reduction Act plus a bill designed to prevent exports of semiconductor equipment to China.

For starters, major domestic carmakers, such as Hyundai Motor and affiliate Kia, have been suffering from weakened price competitiveness in the U.S. market, as they were excluded from the beneficiaries of the subsidy. Samsung Electronics and SK hynix, which rely heavily on the Chinese market, have sighed a breath of relief thanks to grace period in the authorized deliveries of chip-related equipment to China. Yet the new move by the U.S. will likely worsen business conditions facing their plants in China.

Yoon has largely failed to extract concessions in bids to mitigate the adverse effects of the CHIPS act and IRA during his summit with Biden last month. Once the new bill is passed by the U.S. Congress, it would become more difficult to press for our demand by applying pressure on the U.S. administration.

This is why the Yoon administration and the National Assembly, alike, need to combine efforts to carefully watch the move by the U.S. Congress and reflect our stance in the process of the legislation. Fortunately, the new bill has yet to take concrete form awaiting tough negotiations with the Republican Party.

Riding on the possible public support for China's related legislation, the U.S. Congress is highly likely to attempt to introduce diverse bills ahead of the presidential election next year. We should not repeat the same mistake we made in the course of the U.S. legislation of the IRA, ignorant of the moves within Congress. The National Assembly should roll up its sleeves to fortify its network with U.S. counterparts to facilitate communication and cooperation.