South Korea, other nations vie for EU's reduced tariff-free steel quotas

BRUSSELS (Yonhap News) = With the EU's significant steel tariff hike just four weeks away, major steel exporting countries like South Korea are desperately trying to secure tariff-free import volumes.

The EU, to protect its domestic steel industry, will apply new tariff standards from the 1st of next month, reducing the volume of steel products exempt from tariffs from the current 35 million tons per year to 18.3 million tons, nearly halving it. For import volumes exceeding this limit, the current 25% tariff will be doubled to 50%.

The European Commission, the EU's executive arm, plans to finalize national tariff-free quotas through negotiations this month and is currently holding talks in Geneva, where the World Trade Organization (WTO) headquarters is located, regarding the allocation of steel quotas by country.

As the EU needs to amend the tariff concessions under Article 28 of the General Agreement on Tariffs and Trade (GATT) to increase steel tariffs, the EU is seeking to resolve the steel tariff increase issue through negotiations within the WTO framework.

Consequently, major steel exporting countries to the EU, including South Korea, Turkey, India, China, the UK, and Ukraine, are putting in their utmost effort to secure even a slightly larger share of the limited tariff-free quotas for their own countries.

In South Korea's case, separate from the working-level negotiations in Geneva, the head of trade negotiations has visited Brussels, the EU headquarters, twice in three weeks, employing a two-track strategy of persuading high-level EU officials to consolidate their final efforts.

Yeo Han-koo, South Korea's Minister for Trade, met for the second time with Maroš Šefčovič, EU Commissioner for Trade and Economic Security, in Brussels on the 1st, following his meeting on the 11th of last month. He conveyed the concerns of Korean industries regarding the EU's steel import restrictive measures and requested the EU's cooperation to ensure that Korean steel products are not subjected to unreasonable restrictions.

On the 2nd, Yeo also met with members of the European Parliament involved in the legislation for the steel tariff hike, emphasizing that Korean steel products should not face disadvantages.

South Korea, which signed a Free Trade Agreement (FTA) with the EU as the first Asian country, is emphasizing that the steel tariff increase fundamentally violates the FTA. It is also strongly highlighting that the trust in the trade relationship built with the EU over 15 years as an FTA signatory country could be shaken by this measure.

Meanwhile, given the EU's firm stance, it is a reality that the steel tariff increase itself cannot be reversed. Therefore, the country is staking its fate on negotiations to secure the maximum possible tariff-free export volume to minimize damage to the domestic steel industry.

A representative from the domestic steel industry operating in Europe stated, "Due to the EU's move to strengthen import regulations, including the reduction of tariff-free quotas, there are concerns about a decrease in export volumes to Europe, which, along with the US, is one of the two major markets for the domestic steel industry." He added, "We are continuously appealing to the government to secure the maximum possible tariff-free national quota volume."

According to Politico and other sources, as the overall tariff-free volume is expected to decrease by about 47%, major steel exporting countries are assuming that their tariff-free export volumes to the EU will be reduced by nearly half compared to last year. They are mobilizing all their logic to secure even a little more tariff-free volume from this reduced amount.

Last year, South Korea exported approximately 3.11 million tons of steel products subject to safeguard measures (emergency import restrictions) to the EU. Of this, 2.58 million tons were tariff-free under country-specific quotas, while the remaining volume was subject to a 25% tariff.

Under the EU's new tariff standards, South Korea's tariff-free quota is expected to shrink to about 1.3 million tons, roughly half of last year's volume. Exports exceeding this amount will face a 50% tariff 'bomb,' inevitably increasing the export burden on the domestic steel industry.

Trade authorities are emphasizing that South Korea is not only an FTA partner with the EU but also a producer of high-quality steel and is by no means a country that disrupts supply chains, striving to secure even a slightly larger tariff-free volume. They also expect the friendly relationship maintained with the European Commission thus far to be helpful.

However, Turkey, India, the UK, and Japan, which are also major steel exporting countries to the EU, are either FTA partners or customs union members enjoying tariff-free status. Therefore, it is speculated that it will be difficult for the EU to allocate additional tariff-free volumes to specific countries based solely on FTAs.

For Ukraine, which is not an FTA signatory with the EU, there are strong voices within the EU suggesting that more consideration should be given to its tariff-free quota allocation compared to other countries, given its status as an EU candidate country and the ongoing five-year war with Russia.

Considering these circumstances, securing a tariff-free volume that meets industry expectations appears to be a formidable challenge not only for South Korea but also for other major steel exporting countries.