The Need for Deepening US-Korea-EU Economic Cooperation – The Diplomat

Earlier this year, President Yoon Suk-yeol became the first South Korean president to attend a NATO summit. His visit highlighted the prospect of deepening security cooperation between South Korea and Europe, which continued with the recent acceptance of South Korea’s mission to NATO. South Korea’s security cooperation with Europe brings two of the United States’ most important security partners closer together, with all three benefiting from expanded trilateral economic cooperation.

The desire to deepen cooperation between NATO and South Korea is motivated by the need to cooperate with partners outside the region to address, as NATO puts it, “cross-regional challenges and common security interests.” But the same challenges – Russia’s attack on Ukraine or China’s growing assertiveness – are creating the need for interregional security cooperation, interregional cooperation on energy and technology issues. At the same time, digitalization and scientific innovation in biotechnology and nanotechnology, as well as broader economic trends such as climate change, require a similar level of interregional cooperation.

These issues are not regionally specific, but rather require cooperation with partners outside the region. Instead of following the traditional regional focus of cooperation, Washington, Seoul and Brussels would be wise to develop mechanisms that bring together the best partners to cooperate on specific issues.

Trilateral cooperation between the United States, the European Union, and South Korea opens up the already deep economic ties between the three economies and provides an opportunity to improve coordination on emerging economic issues. All three economies are among each other’s top 10 trading partners; all are technology leaders and pursue ambitious climate goals. South Korea also became the first major economy to have free trade agreements with the United States and the European Union.

Given Tokyo’s reluctance to include Seoul in the G-7, trilateral cooperation will address the issue of integrating South Korea into regular discussions with Europe on economic and technological issues.

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Although there is potential for deepening cooperation, any effort to build trilateral cooperation should be limited in its early stages to avoid overloading the relationship and to focus on cross-cutting issues and opportunities related to technology, energy and climate change.

Tech Cooperation

The era of globalization, when technology flowed largely unhindered to other countries, is over. While pandemic shortages have underscored the need for the United States and the European Union to increase domestic semiconductor manufacturing capacity, competition with China is changing how critical technologies such as semiconductors are viewed.

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Starting with the Trump administration, the US has tried to restrict the flow of advanced technology to China. The Biden administration has followed suit by tightening export restrictions on sales of semiconductors and related equipment to China, and is weighing export restrictions on biotechnology and the algorithm that underpins artificial intelligence. The EU is also moving towards a view that it needs to maintain its technological advantage over China.

With more than 75 percent of the world’s semiconductors produced in Asia, the United States is looking to deepen ties with its partners in the region through the Chips 4 initiative, specifically targeting South Korea. But semiconductor initiatives outside the EU, an important partner for semiconductor equipment, are suboptimal at best. A trilateral cooperation between the United States, South Korea and the EU would bring together three important players in the industry and fill the gap in the 4th chip.

Semiconductors, as the world’s top three technology economies, should be the focus of any initial tripartite cooperation, but enhanced consultation will help bridge differences in approaches to technology and digital trade. The United States and the EU often take different positions on data privacy, while South Korea is at the forefront of developing metaverse and demanding new standards for in-app payments. The US, EU and South Korea don’t always agree on these issues – for example, Washington and Seoul have different views on in-app payments – but all are interested in working together and ensuring standards that support open and transparent technologies.

The United States and the European Union could facilitate trilateral cooperation by expanding the US-EU Trade and Technology Council (TTC) to include South Korea. The TTC was originally designed to demonstrate that democratic and market-oriented approaches to trade, technology and innovation still work in a world of growing state capitalism. Among them, South Korea may intensify this process.

Cooperation on Energy and Climate Change

Russia’s invasion of Ukraine and the weaponization of energy exports have heightened the need for cooperation on energy security. Before the Russian takeover, the EU was dependent on Russia for a third of its oil imports and more than half of its LNG imports. South Korea is less dependent on Russia, which accounts for only 9 percent of its fossil fuel imports, but is more dependent on the Middle East, another potentially conflict-prone region.

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In the immediate aftermath of the crisis, the United States increased energy exports and helped the EU secure other sources of energy, including South Korea, which agreed to divert some of its LNG to Europe.

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Climate change is where immediate concerns and their national security implications begin to converge with the potential for technology and energy cooperation. The United States, South Korea, and the European Union have ambitious climate change initiatives. The United States aims to reduce emissions by 50-52 percent by 2030, South Korea by 40 percent by 2018, and the European Union by 55 percent by 1990. Achieving these goals should include the transition to electric vehicles, the greening of carbon-intensive processes such as steel production, and the development of new energy sources, as well as the regulation of carbon borders for trade. These are all potential areas for collaboration.

One example of this convergence is the shift to electric vehicles (EVs). South Korea will play an important role in the transition, especially in the EV battery industry. South Korean firms announced another $13 billion in EV battery production in the United States to meet the needs of domestic and foreign manufacturers. South Korean firms are also expanding production in the EU to meet European demand.

The US Inflation Reduction Act (IRA), however, requires that the minerals used in the production of EV batteries be sourced from the US or US FTA partners in order to be eligible for half of the EV subsidy provided under the IRA. While this has strained relations with South Korea and the European Union, it is designed to encourage supply chains in high-tech products and minerals considered critical to national security to shift to the United States or friendly partners and away from China. it has come to dominate the mining and processing of minerals.

Expanding trilateral cooperation will not only help resolve IRA disputes with two key US partners, but will also allow for better coordination between the US and the EU, which already cooperate and set new standards to reduce steel emissions from South Korea, a major steel producer. Achieving carbon neutrality by 2050. Cooperation could also be extended to discussions on the development of carbon capping measures and the commercialization of new fuels such as hydrogen, which can replace gas in some applications and is being pursued by all three economies.

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Cooperation in each of these areas will help the US, EU and South Korea develop secure energy supply chains, while developing advanced technologies in energy and energy-related industries.

Despite the potential, there are obstacles to deepening trilateral cooperation. As the world’s two largest economies, the United States and the European Union may be reluctant to bring in new partners like South Korea and instead work together to create standards for new technologies or rules to regulate carbon borders. This would be counterproductive at best and self-defeating at worst, as both the EU and South Korea’s protests against the Anti-Inflation Act show.

For example, despite concerns about China’s leadership in 5G patents, South Korean firms rank second in total patents. When the US and the EU are added, the three economies have a significant lead. The quality of patents is important, but whether it’s 5G, semiconductors or other technologies, South Korea is a key partner in technology standards discussions.

South Korea faces its own hurdles in trilateral cooperation. While the Yun administration has welcomed the idea of ​​turning South Korea into a global powerhouse, it has previously been reluctant to take concrete steps due to concerns about China’s response. South Korea, for example, has taken tentative steps with Chips 4 despite criticism from China, but more substantial alignment with the United States and the European Union may be difficult.

Despite these challenges, trilateral economic cooperation would be beneficial. For any new forum of collaboration, the test is whether it brings new skills and capabilities to the table or fills gaps in the existing architecture. At a time when the G-20 will decline in importance due to Sino-US rivalry, there is no solid platform uniting the United States, the European Union and South Korea, to say nothing of Russia’s role. the world’s largest economies and important technology partners. There will be issues such as climate change that require working with other partners, but the development of trilateral cooperation on technology, energy and climate change will help fill the important cooperation gap and improve coordination on emerging issues and provide economic benefits.

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