China and IPEF

President Joe Biden thanked Euisun Chung, chairman of Hyundai Motor Group, who announced an additional $5 billion of investment in the United States before Biden left the country after pledging $5.54..

Nam Jeong-ho The author is a columnist of the JoongAng Ilbo. President Joe Biden thanked Euisun Chung, chairman of Hyundai Motor Group, who announced an additional $5 billion of investment in the United States before Biden left the country after pledging $5.54 billion for an EV project in Georgia. “We will try not to disappoint him in order to repay his investment,” Biden said during a press conference with Chung at the Grant Hyatt Hotel in downtown Seoul on Sunday.

Biden spent his first day at a chip complex of Samsung Electronics, which earlier announced $17 billion foundry project in Texas.

Biden has not hidden appreciation for foreign capital investment in his country, but is harsh on American capital going outside. His administration has raised the corporate income tax levy on companies with overseas operations to 28 percent from 21 percent. If they return home, the tax rate is cut by 10 percent. Over 1,300 U.S. enterprises have returned home as the result.

In Korea, reshoring cases totaled just 26. Even considering the difference in economic size and hard-line labor unions in Korea, the U.S. has benefited big from reshoring and America First policies as seen with generous pledges by Samsung and Hyundai.

Hyundai Motor Group Chairman Euisun Chung shakes hands with U.S. President Joe Biden during a meeting held at the Grand Hyatt Hotel in Yongsan, central Seoul, on May 22. [YONHAP]

But jobs at large companies slimmed under the former Moon Jae-in administration despite high youth unemployment rate. The first summit between Korean President Yoon Suk-yeol and Biden went well, extending traditional security alliance to a comprehensive strategic level to encompass technology, energy and other economic areas.

The primary purpose of Biden’s first Asian tour had been the launch of an Indo-Pacific Economic Framework(IPEF) in Japan on Monday, designed to muster allies together for a united front on chips, batteries and other strategic technologies and assets against the rise of China.

Yoon during the press conference after the summit talks pledged to build a strategy for Korea’s role and contribution in the region, officially declaring the intent to join IPEF. He was right to restore ties with the U.S. that had withered under the previous government. But Seoul must deal with strong objections from Beijing.

During his first virtual meeting with his Korean counterpart Park Jin, China Foreign Minister Wang Yi on May 16 warned against Korea’s “decoupling” with China due to adverse effects on the supply chain. The tone had been pretty strong for a first greeting.

Korea has suffered as much as 21 trillion won in losses due to retaliatory action from Beijing for installing U.S. antimissile system. Korea must take care that it does not invite another round of retaliation from Beijing.

Even under U.S.-led IPEF, Korea must not blindly follow the U.S. as it is neither wise nor right. IPEF has democractic states upholding common values, but it is designed mostly to serve U.S. interests. Tariff cuts are the keystone in the reciprocal trade order to vitalize cross-border trade and support mutual interests. But tariff cuts are not part of the IPEF agenda. Instead it has tougher rules on labor and environment.

Even allies must argue for self interest. The European Union has battled numerous times with the U.S. over trade issues. Their disputes have been never-ending and often furious on themes like genetically modified foods and beef hormones. The Donald Trump administration slapped a 25-percent levy on EU steel. But the relationship did not suddenly turned bad.

Biden is different from coarse Trump. He is more gentlemanly, but there is a price to pay for his beaming smile and thank-yous. Since IPEF terms would be discussed through negotiations, they must reflect national interests. The big Korea-U.S. alliance framework must be upheld, but Seoul must take into account its relationship with China and speak for national interests on every issue.