Korea to Respond to Global Trade Issues in Tandem with Japan

With the restoration of shuttle diplomacy, Korea and Japan will jointly respond to trade issues such as the U.S. Inflation Reduction Act (IRA) and the European Union’s Carbon Border Adjustment Mechanism (CBAM).

Following a visit to Korea by Japanese Prime Minister Fumio Kishida, the two nations’ discussion on trade cooperation is expected to accelerate as a series of multilateral economic organization meetings including the Indo-Pacific Economic Framework (IPEF) and the Asia-Pacific Economic Cooperation (APEC) to be held this month. Both countries will participate in these meetings.

According to the relevant Korean ministries on May 8, the Korean government will hold high-level bilateral consultations with the Japanese government on the occasion of the APEC Trade Ministers’ Meeting to be held in late May. The bilateral consultation is expected to cover trade issues that the two countries can cooperate on such as the U.S.’ IRA, the EU’s CBAM, and the CF100, which promotes 100 percent carbon-free electric power.

The APEC Trade Ministers’ Meeting to be attended by 21 major Asia-Pacific economies including Korea, the United States, Japan, and China will run in Detroit, Michigan, United States from May 25 to 26. This year’s main agenda includes strengthening the roles of multilateral trading systems in relation to emerging trade issues such as supply chains, digital technology and systems, and carbon neutrality and promoting sustainable and inclusive trade.

In particular, the Korean Ministry of Trade, Industry and Energy (MOTIE) will hold bilateral consultations with its Japanese counterpart on the occasion of APEC to explore ways to cooperate in areas where Korea and Japan are faced with similar challenges such as the U.S. IRA and the EU CBAM. The Korean ministry believes that a need for supply chains and technology cooperation between Japan and Korea, which have similar manufacturing industries, has increased as the U.S.-China hegemonic race heats up and there are discussions on weaponizing resources such as rare metals and strengthening regional supply chains in world trade.

As for the IRA, which provides subsidies for North American-made electric vehicles, both Korean and Japanese automakers were excluded from the subsidy eligibility list because they failed to meet requirements. Regarding the supply chain of key minerals for batteries, both countries participate in the Mineral Security Partnership (MSP), so they may discuss further cooperation in this domain.

Regarding the EU CBAM, which imposes a carbon border tax on imports of steel, aluminum, and fertilizers, both countries have similar concerns that it could be applied in a discriminatory manner to Korean and Japanese exporters. The Korean and Japanese governments and steel industries are planning to hold the first public-private consultations on the Korean-Japanese steel sector in four and a half years, which will also discuss ways to deal with CBAM.

The Korean government is also pushing to make the CF100 an international agenda and has reportedly begun to encourage Japan to join Korea in the move. The CF100 is the concept of using not only renewable energy but carbon-free power sources including nuclear power, hydrogen, and carbon capture, storage, and utilization (CCUS). It is a concept to respond to the RE100, which advocates the use of 100 percent renewable energy. The Japanese government is said to have a position similar to that of the Korean government.

In addition to trade issues, the two countries are expected to strengthen exchanges and cooperation in their major industries such as semiconductors and batteries. The goal is to maximize the common interests of both countries by linking Korea’s outstanding manufacturing technology in semiconductors and batteries with Japan’s competitiveness in materials, parts and equipment.

“At an IPEF meeting which will run from May 8 to 15, working-level officials from Korea and Japan are negotiating and exchanging opinions from time to time,” a Korean MOTIE official said. “We are mainly discussing trade, clean economy, and supply chain stabilization.”

Meanwhile, a meeting was held between Japanese Prime Minister Fumio Kishida and the heads of six Korean economic organizations at Lotte Hotel in Seoul. At the meeting, the heads of the economic organizations requested Kishida to increase exchanges and support in the areas of resource development and materials, parts, and equipment. Prime Minister Kishida asked them to take the initiative in expanding cooperation between Japan and Korea.