European Firms Unlikely to Relocate to South Korea
South Korean Trade Minister Yoo Myung-hee met with EU Green Deal chief Frans Timmermans in Seoul and discussed the carbon border adjustment mechanism (CBAM) on July 6.
The CBAM is to levy a cost on an imported product if the production of the product resulted in a carbon emission amount exceeding the amount resulting from the production of the same product in the European Union. According to the Korea Institute for International Economic Policy, South Korea’s additional burden will amount to US$1,061 million a year assuming that the European Union imposes 30 euros by ton of carbon dioxide.
At the meeting, the EU Green Deal chief remarked that the CBAM does not target South Korean exporters and the mechanism will be designed not to affect countries like South Korea that have managed their carbon emissions by measures such as emissions trading. “The European Union is adopting the carbon border tax in order to prevent European companies from relocating to China, Russia, Turkey and the like for the purpose of carbon regulation avoidance,” said a trade expert, adding, “European companies are unlikely to relocate to South Korea, which means the CBAM is unlikely to target South Korea.”
It is said that his remark is to introduce the carbon border tax smoothly. Once the taxation is implemented, the United States as well as Russia and Turkey is likely to resist. In addition, the taxation may violate the national treatment principle of the WTO with the European Union still maintaining free emission quotas.