How to bury your head in the sand

The Green Industry Act in France, a French version of the U.S. Inflation Reduction Act (IRA), took effect this week. The French government is to grade carbon emissions from production to distribution of electric vehicles (EVs) and subsidize them with a tax credit per EV of 5,000 euros ($5,500) to 7,000 euros. The 78 models of EVs subject to the incentives are mostly of French or European brands. Vehicles from Korea and other Asian countries lost points on the grounds that they would emit more carbon in the shipping process.

Kona of Hyundai Motor was the sole Korean marque to join the list because it is produced in a factory based in the Czech Republic in central Europe. Niro EV and Soul EV of Kia Motors were excluded from the list as they were not produced on the European turf. Among the EVs of American carmakers, Tesla’s Y model survived because it is produced in Berlin. Its production base in Europe made the difference.

Although containing a carbon footprint was the selling point, the real motive of France was to protect and promote its EV industry. France mimicking the United States’s IRA underscores the pivot toward protectionism in the global trade environment. Protectionist movement can only build up around the globe.

The phenomenon spells catastrophe for Korea, which could boost its export competitiveness thanks to free trade. Korea’s economic future depends on its response to growing trade protectionism amid the intensifying struggle between the U.S. and China and the realignment in global value chains.

Despite the weight of external trade, Korea has been responding poorly to alarming developments overseas. The government sent delegates only after it learned of the French list of EV brands subject to incentives through a published announcement by the French government. France announced in May that it will enact the Green Industry Act. And yet, the Ministry of Industry, Trade and Infrastructure in Korea submitted a letter with the private sector petitioning for reconsideration by the French government, as the bill violates the free trade agreement between the two countries. But what further efforts the Korean government made are still questionable.

The presidential office in Seoul replaced the industry and trade minister just a third month into his term to field him for the upcoming parliamentary election in April. He was replaced by his subordinate in the ministry, which caused confusion in the government’s trade policy. Opposition Democratic Party leader Lee Jae-myung criticized the presidential office for losing attention to critical affairs due to its focus on the next parliamentary election. The government must come up with a vigilant and proactive strategy to address protectionist moves from foreign countries.