Is South Korea vulnerable to EU and US carbon border restrictions?

Jeffrey Schott and Megan Hogan

No PB22-10, Policy Briefs from Peterson Institute for International Economics

Abstract: South Korean exports, especially carbon-intensive products like steel, are increasingly vulnerable to both the European Union's proposed carbon border adjustment mechanism (CBAM)--set to begin on January 1, 2023--and the proposed Clean Competition Act (CCA) before the US Congress. Schott and Hogan caution that Korean exporters should not count on Korea's decade-old EU and US free trade agreements (FTAs), nor on the multilateral trading rules of the World Trade Organization (WTO), to protect them from new carbon-based import barriers in key foreign markets. The WTO and the FTAs have broad and loosely defined exemptions for environmental protection. Nor is Korea likely to be shielded by its own cap-and-trade emissions trading system (the K-ETS), because of extensive use of free allowances and large differences between EU and Korean carbon prices. While the threat the EU CBAM poses to Korean exports is imminent, passage of the CCA faces major legislative obstacles. But US imports of Korean steel and other carbon-intensive goods are still subject to climate-related duties at the US border under US unfair trade statutes. The US Department of Commerce has ruled that free allowances issued under the K-ETS (and EU ETS) are implicit subsidies that can be offset by countervailing duties. These charges are in addition to the harsh tariff-rate quotas on imported Korean steel applied under the "national security" authority of Section 232 of US trade law, which are more restrictive than measures imposed against European and other steel exporters. The authors suggest relaxing these US barriers, as they have been for shipments from Europe, in return for Korean participation in the nascent US-EU talks to establish a "Global Arrangement on Sustainable Steel and Aluminum."

Date: 2022-07
New Economics Papers: this item is included in nep-ene, nep-env and nep-int
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.piie.com/publications/policy-briefs/so ... -border-restrictions (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iie:pbrief:pb22-10

Access Statistics for this paper

More papers in Policy Briefs from Peterson Institute for International Economics Contact information at EDIRC.
Bibliographic data for series maintained by Peterson Institute webmaster ().