[Editorial] Embarrassing subsidy standards

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[Editorial] Embarrassing subsidy standards

Just two years ago, big Korean companies’ aggressive investments in the United States were flagged as the symbol of the Korea-U.S. alliance. U.S. President Joe Biden mentioned Korea’s household corporate names for their generous investment every time he met with Korean presidents. During his summit with president Moon Jae-in in May 2021, Joe Biden saluted the representatives of Samsung, Hyundai Motor and SK.

While stopping in Korea for his summit with President Yoon Suk Yeol in May last year, Biden went straight to the chip factory of Samsung Electronics in Pyeongtaek, Gyeonggi, to highlight the “tech alliance” of the two countries. The chip alliance was dubbed a “win-win strategy,” as the U.S. can strengthen its chip ecosystem on home while Korea can penetrate deeper into the U.S. market.

But the provisions of the U.S. CHIPS and Science Act confound us. Under the terms, foreign companies receiving U.S. subsidies must share their excess profit with the federal government and report their finances, including cash flow, in detail. They also cannot expand their chip production facilities in China for 10 years. The U.S. government claims the conditions are necessary in return for the $39 billion tax fund to foreign chipmakers ultimately desgined for the interests of the U.S. economy and security.

But the demands can seriously infringe on corporate sovereignty. Chipmakers are sensitive in disclosing their chip processing technologies. Korean companies could be victimized by the “Make America Great Again” slogan by Biden. He has been as demanding as his predecessor Donald Trump, albeit in less blunt rhetoric.

The Korean government must stand up for its companies. The economy and security must move as one. The Ministry of Foreign Affairs and the Ministry of Trade and Industry last year fought over who should have the jurisdiction over trade diplomacy. They must prove their worthiness if they mean well.

Korea must not make any concessions with its chip competitiveness to maintain the edge over China and the U.S. The most advanced processing technology and R&D facilities must not leave the country. The legislature must hasten with the chip support legislation to help secure the competitiveness of its semiconductor industry.

Multibillion-dollar investments in the U.S. mean less jobs for Korea and less exports for the country. Still, Korean companies went on with massive-scale investments in America on expectations of mutual benefits. The U.S. solely seeking its own benefit while stressing the tech alliance for the realignment in supply chains is not acceptable. The two governments must strike a good balance if they really do not want to damage their bilateral relationship for the future.
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