To Rectify Unfair U.S. Safeguard Tariffs
South Korea and the United States are entering into a legal battle over the U.S. safeguard tariffs on South Korean washing machines at the World Trade Organization (WTO).
The WTO formed a panel to settle the dispute in Geneva, Switzerland, on July 1, according to the Ministry of Trade, Industry and Energy (MOTIE) on July 28. Panel formation is a process to appoint a judge panel. It is a mandatory step to settle a dispute at the WTO. As the WTO has elected three members of the panel, the two countries will engage in a legal battle through submission of written documents and hearings in the future. A MOTIE official said, “Considering leave schedules of the WTO office, the next procedure after the formation of the panel will begin in September.”
In January 2018, U.S. President Donald Trump approved emergency import restrictions known as safeguards against washing machines and solar cells and modules imported from other countries, including South Korea. As a way to combat unfair anti-dumping tariffs that the United States has imposed on South Korean washing machines, the South Korean government notified the WTO that it would impose US$480 million (568.56 billion won) worth of retaliatory tariffs on U.S. products a year. It came up with the figure based on the estimation of additional tariffs imposed on South Korean exports through the safeguard measures, including US$150 million (177.68 billion won) on washing machines and US$330 million (390.89 billion won) on solar power products a year. The WTO’s safeguard agreement requires an importing country which take safeguard measures to compensate an exporting country for loss and allows an exporting country to ask for permission to suspend concessions.
However, suspension of concession cannot be implemented immediately. The WTO’s safeguard agreement forbids suspension of concession for three years if the safeguard measures tally with the agreement. South Korea is required to receive a ruling from the WTO’s Dispute Settlement Body (DSB) that U.S. safeguard tariffs are contrary to the agreement through lawsuits in order to receive permission to suspend concessions before three years. The South Korean government submitted it to the DSB in May.
Although South Korea has started the procedure to rectify the U.S.’ unilateral action in a year, some express concerns. With Japan strengthening retaliatory measures against South Korea, including exclusion from the whitelist, South Korea is desperate to secure international cooperation to prevent it. In particular, the government has been considering the United States a country that can have influence on Japan and asking for cooperation. This is why Kim Hyun-chong, the second deputy chief of the presidential National Security Office (NSO), and Yoo Myung-hee, the trade minister at the MOTIE, had meetings with U.S. trade and economy officials after Japan’s announcement to impose export restrictions against Seoul.
However, the government says that the dispute will not adversely affect the cooperation with the United States. A MOTIE official said, “The two countries are creating a good atmosphere to such an extent as to select two out of three panel members through agreement. At common WTO practices, it is rare to correlate a specific dispute with other issues.”