MAGA all over again

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MAGA all over again

Lee Hyun-sang

The author is a columnist of the JoongAng Ilbo.

“I will not disappoint you,” whispered U.S. President Joe Biden to Hyundai Motor Group Chairman Chung Eui-sun in the garden of a five-star hotel on Mount Namsan in Seoul. Three months ago, Biden made that comment in reaction to Chung’s promise to invest $10.5 billion in the United States. Does the U.S. president still remember what he said while patting Chung on the shoulder on a sunny day in May?

After Biden’s signing of the Inflation Reduction Act (IRA) on August 16, U.S. subsidies for Hyundai and Kia electric vehicle (EV) models sold in America vanished. That will certainly deal a heavy blow to Hyundai’s dramatic ascent to the second highest market share for its EVs — nine percent — in the U.S. The principle of “free and fair trade,” the backbone of the U.S.-led global order, was shattered.

Hyundai plans to restore its price competitiveness by expediting the construction of an EV factory in the state of Georgia. But it is not an easy job given all the requirements — getting permissions from U.S. authorities, rearranging contractors to hasten the construction, and persuading labor unions in Korea to allow it. Even if everything goes well, it will take at least more than two years to build the factory. No one knows if American demand for Hyundai EVs will remain robust until then. The Korea Automotive Industry Alliance (KAIA) expects the signing of the IRA will result in an export reduction in Korean EVs of 100,000 annually.

Bilateral trade conflicts surfaced between the two allies in the past. But this one is really shocking as it erupted when the two countries are reshaping their alliance based on values amid the heated Sino-U.S. contest. Does that mean the allies can share values but not interests? Korea demands special treatment as an “ally for economic security” from the U.S. But that demand can hardly be met, as the U.S. cannot treat Korea different from Europe and Japan. Above all, America wants to rebuild the base for its entire manufacturing sector, including materials, parts and production, within its borders over the long term. It could be wiser for Korea to find some realistic solutions based on reciprocity.

An immediate countermeasure could include a fixing of the subsidizing system for electric vehicles sold in Korea. Though Korea-made EVs cannot receive any subsidy from America, U.S.-made EVs still can receive a subsidy from Korea. U.S. EVs took 44.8 billion won ($33.4 million) in subsidies from the Korean government in the first half. (Most of the money went to Tesla.) The amount is approximately one tenth of the government’s subsidies for all EVs sold in Korea. Compared to U.S. discrimination against foreign EVs, Korea’s subsidy for foreign models seem quite generous.

Reshoring manufacturing back to America is nothing new. It has continued since the passage of the 2010 Manufacturing Enhancement Act by Barack Obama’s administration. Biden was elected president by criticizing Donald Trump’s “America First” policy, but he was no different. Biden’s trade policy is worse than his predecessor’s. Just four days after his inauguration in 2021, he signed an executive order aimed at forcing the federal government to buy more goods produced in the U.S. The bold Chips and Science Act Biden signed on August 10 is designed to block global chipmakers from manufacturing cutting-edge semiconductors in China in return for hefty subsidies for foreign companies investing in the U.S.

Though the goal of reviving the U.S manufacturing sector was packaged as “national interests,” it boils down to winning votes ahead of the midterm elections in November. In a recent contribution to Foreign Affairs, Biden declared a “foreign policy for the middle class” to stop the de-industrialization of America and create jobs for American workers. In essence, Biden’s “Build Back Better” is no different from Trump’s “Make America Great Again.”

Biden’s signing of the IRA Act reminds us of the plain yet cold truth behind international relations: values give way to national interests. That may be what the Yoon Suk-yeol administration forgot while switching fast to a “values-based alliance” so ardently championed by Biden. Over semiconductors and the Thaad missile defense system, where Korea’s future is at stake, America and China are pressuring Korea to choose between them. The IRA Act could be a confession that the United States will not take responsibility for the results of choices Korea makes. Another concern has surfaced on the foreign and trade policy front of the Yoon administration.
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