"Korea must not only invest unilaterally but also secure market access commensurate with its investment expansion, creating a mutually beneficial structure for both Korea and the U.S.," said Jeong Cheol, head of the Korea Economic Research Institute and the Korea Economic Association, in a recent interview with Aju Economy.
As discussions continue on the details of a $200 billion investment project in the U.S., Jeong emphasized the need for Korea to secure market access and trade benefits that correspond to its investment contributions.
"The U.S. is restructuring production in strategic industries such as semiconductors, automobiles, batteries, and steel to focus on domestic capabilities while also cracking down on indirect exports through allied countries to counter China," he noted. He urged the government to maintain the agreed 15% tariff rate and continuously seek exemptions or relief from additional tariffs under Section 232 of the Trade Expansion Act.
Jeong stressed the importance of presenting concrete evidence of the impact of Korean investments on the U.S. local economy. He stated, "We need to demonstrate how Korean companies' investments contribute to local employment, wages, tax revenues, and the ecosystem of partner companies. We should work to receive tariff exemptions under Section 301 of the Trade Act by bundling U.S. investments, employment, purchases of American energy, and contributions to supply chain stability together."
He also highlighted the necessity of requesting item-specific tariff exemptions, low tariff quotas, reasonable application of origin standards, and temporary tariff suspensions during the local investment implementation period.
Regarding the U.S.-China strategic competition, Jeong suggested that Korea should adopt different response strategies for various industries and products. He remarked, "Korea's choice is not simply between 'the U.S. or China,' but rather 'what to collaborate on and with whom.' In advanced technology and strategic industries, we should strengthen supply chain cooperation with the U.S. and friendly nations, while pragmatically utilizing the Chinese market in non-security areas."
He identified the European Union's Carbon Border Adjustment Mechanism (CBAM) as a new condition affecting companies' market entry. In the short term, he recommended expanding support for small and medium-sized exporters to measure and verify carbon emissions through a joint data platform, specialized personnel, verification costs, and consulting.
In the long term, Jeong called for a transition to electric and hydrogen-reduced steelmaking, increased low-carbon power, and improved energy efficiency. He emphasized, "Carbon reduction is no longer just an environmental policy; it is a trade policy and a matter of industrial competitiveness."
Jeong pointed out that the spread of protectionism externally and the narrow recovery focused on semiconductors internally pose risks to the Korean economy. He noted, "While the recovery has begun due to the U.S.'s increased investment in artificial intelligence (AI) and our semiconductor technology, the benefits have not sufficiently spread to other industries. Excluding Samsung Electronics and SK Hynix, the operating profits of listed companies have actually decreased by 3.7%, highlighting a clear 'K-shaped polarization.'"
He stressed the need to expand the recovery led by semiconductors to the broader manufacturing sector, domestic consumption, and new industries. Jeong warned, "The narrower the recovery base, the weaker the sustainability of growth and the overall economy's resilience to external shocks."
For the next decade, Jeong proposed 'Physical AI' as a growth driver for the Korean economy. He described Physical AI as integrating AI into manufacturing sites to enhance productivity in sectors such as automotive, shipbuilding, steel, and batteries, while also developing robots, sensors, AI semiconductors, and control software as new export industries.
He emphasized the importance of spreading the productivity benefits of AI across all industries. He stated, "Rather than focusing on specific industries, creating conditions for all industries to transition is the path to becoming a country that not only excels at making AI but also at using it effectively."
To foster new growth drivers, including Physical AI, Jeong argued that regulations and licensing systems hindering corporate investment must be improved. He suggested, "We should transition to a negative regulatory framework that allows new attempts that are not explicitly prohibited while maintaining clear safety standards, and expedite the licensing processes for AI data centers and advanced semiconductor factories."
Jeong holds a master's degree in economics from Sogang University and a Ph.D. in economics from the University of Michigan. He has served as a professor at the Georgia Institute of Technology, chief economist at the Korea International Trade Association, and vice president of the Korea Institute for International Economic Policy (KIEP). Since 2024, he has been the head of the Korea Economic Association and the Korea Economic Research Institute.
* This article has been translated by AI.
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