[Why&Next] One Month Since Park Jungseongho Took Office... $350 Billion US Investment, Time to Maximize Gains

Unveiling the First US Investment After 10 Months

"One Step Behind Japan"... An Urgent Test of Speed

Defending Against Excess Tariffs and Expanding the Trade Landscape Remain Tasks

With the inauguration of its new chief, the Office of Trade Negotiations has completed its organizational restructuring and is now set to begin full-scale implementation of investment agreements with the United States. As Japan has already executed its investment commitments with the US ahead of Korea, attention is focused on whether Korea can secure tangible investment benefits while adhering to the 15% tariff cap agreed upon with the US last year. The speed of implementing US-bound investment projects and the strength of Korea’s negotiation capabilities under the new Office of Trade Negotiations are expected to determine its overall success.

10 Months Just to Lift the Veil... Fast Execution of the First US Investment Is Key

The most urgent priority is the implementation of the 'first investment project' in the US. With the risk of excess production tariffs under Section 301 of the Trade Act still looming, further delays compared to Japan’s progress could weaken Korea’s bargaining power. The stance of the Donald Trump administration, with the US midterm elections coming up in November, also remains an unpredictable factor.

Cho Sungdae, Director of the Trade Research Division at the Korea International Trade Association, said in a phone interview with The Asia Business Daily on September 16, "It is an objective fact that Korea’s investment in the US is being delayed more than expected. While Japan and Taiwan have already moved forward following their announcements, Korea has yet to do so. From the US perspective, Korea may appear the most passive if investments are to be prioritized," he pointed out.

Director Cho further emphasized, "With less than two months before the midterm elections, the Trump administration is showing increased impatience and is seeking tangible results that can appeal to voters. From the US side, having reduced tariffs on Korean vehicles from 25% to 15%, they could demand Korea follow through as well. For now, the key is implementing the agreed-upon commitments."

Last November, the Korean government pledged a total of 350 billion dollars in US-bound investments, including 150 billion dollars in shipbuilding and 200 billion dollars in strategic investments, on the condition that tariffs would be reduced from 25% to 15%. The annual investment cap for Korea, as agreed between the two sides, is set at 20 billion dollars.

Candidate projects for Korea’s first US-bound investment include the Encinal gas combined cycle power plant in Texas and a major nuclear power plant construction project. The investment scale for the Encinal gas combined cycle power plant is expected to reach 22.3 billion dollars (approximately 30 trillion won), 2.5 billion dollars more than the initially considered 19.8 billion dollars, following a request from the US side to increase the budget.

Regarding this, Professor Kim Tae-hwang of the Department of International Trade at Myongji University commented, "The construction of the Texas Encinal gas combined cycle power plant and nuclear power orders are positive news for us." He added that this presents an opportunity to promote national interests through nuclear exports, while avoiding intellectual property disputes with Westinghouse in the US.

'Commercial Rationality' of US-Bound Investments Matters, But Avoid 'Penny Wise, Pound Foolish'

However, there are concerns that becoming overly focused on short-term calculations and 'commercial rationality' could result in missing the optimal window for implementation.

Professor Kim noted, "If it took this long just to decide on the first project, it’s questionable whether the second and third projects are being systematically identified and reviewed. Overemphasis on profitability and rationality could cause us to miss the right timing, leading to a scenario where small gains result in bigger losses."

He also stated, "The US employs a complex strategy like a 'winning hand' by holding various cards, including the online platform act, Coupang lobbying issues, and troop deployment requests. In contrast, we tend to address each matter in isolation, hampering our ability to choose and focus effectively. The issue of US-bound investments should not rest with the head of the Office of Trade Negotiations alone—the presidential office ought to offer strategic guidance for the broader framework, and the Embassy of the Republic of Korea in the US must significantly strengthen its local political lobbying network," he added.

Conversely, some argue that maintaining commercial rationality should not be sacrificed merely to match Japan’s pace of implementation.

Jang Sang-sik, Director of the Institute for International Trade and Commerce, said, "Japan has ample funds and operates on a politically driven basis, but Korea is more affected by post-project evaluations and accountability. In the long term, adhering to commercial rationality may be the better approach. Given our balanced competitiveness across various manufacturing sectors, Korea should pay closer attention to how much our businesses can profit from or participate in these US-bound investments and accumulate experience."

Director Jang continued, "The Korea-US Joint Statement (JFS) already includes the provision that US-bound investments are capped at 20 billion dollars annually. Taking into consideration exchange rates and foreign currency conditions, Korea should focus on reaffirming its commitment to fulfilling existing promises, while continually building trust by contributing to US manufacturing revitalization and energy cooperation to deflect pressure from Trump."

Defending the Tariff Cap and Expanding Trade Territory Remain Challenges

Defending against 'overproduction tariffs' under Section 301 of the Trade Act is another challenge for the new Office of Trade Negotiations. As of July, the cap for forced labor tariffs applicable to Korea was set at 12.5%. If additional tariffs are imposed, the overall tariff cap from the prior Korea-US agreement—15%—must still be observed.

In this regard, Director Jang remarked, "Since the 15% agreement framework is already in place, and except for steel and petrochemicals, Korea’s manufacturing operating rate generally isn’t excessive, so the direct impact of Section 301 overproduction tariffs appears limited."

Professor Kim also explained, "The key to defending against Section 301 is preventing the tariff rate from worsening beyond last year’s agreed 15% cap, and ensuring Korea does not receive worse treatment compared to other countries such as Japan or the European Union. It is crucial to secure most-favored-nation (MFN) status."

Diversifying trade markets is also necessary. To respond to US-China tensions, protectionism, and China’s export of surplus supply, experts advise Korea to accelerate participation in large-scale free trade agreements (FTAs) such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Director Jang advised, "In the face of US tariff barriers and China’s oversupply, Korea must secure access to third-country markets, making participation in mega FTAs indispensable. The new Office of Trade Negotiations should pursue CPTPP membership more aggressively."

This content was produced with the assistance of AI translation services.