About the author: Jamieson Greer was chief of staff to the U.S. trade representative from 2017 to 2020, and currently practices international trade law in the private sector.
I landed in Seoul in August 2017 as the head of a U.S. delegation to chair the first-ever special session of the South Korea-U.S. Free Trade Agreement Joint Committee. The agreement is known as Korus, and that first meeting to renegotiate it was contentious. The U.S. administration sought to review the agreement given concerns over relative trade flows between the U.S. and Korea. It is no secret that President Trump seriously considered withdrawing from the economic pact, and substantive modifications to the agreement were necessary to make it more politically sustainable in the U.S.
Today, Korean efforts to adopt regulations that discriminate against U.S. companies pose a new threat to the stability of the U.S.-Korea trade relationship. One piece of legislation, which was proposed last month and is still being considered, would be particularly damaging.
Promoted as part of a broader anti-monopoly push, the Korean Fair Trade Commission plans to introduce the Platform Fair Competition Promotion Act. The law would effectively target large U.S. digital companies and some Korean companies by designating them as monopolies and oligopolies and then restricting their business models in ways designed to thwart their success.
The legislation would empower the KFTC to use subjective criteria like “influence in the market” to prohibit U.S. companies from engaging in normal and beneficial business practices such as promoting their own offerings on their platforms. The legislation could potentially even require companies to disclose their algorithms and trade secrets, and could suspend a company’s operations before findings of wrongdoing are made. Policymakers in Korea cast the legislation as an effort to benefit smaller companies and increase fair competition, but it would have little anti-monopoly effect and multiple negative consequences for companies and consumers.
As a partner in Korus and a member of the World Trade Organization, Korea has made commitments that it will not discriminate against U.S. companies. But discrimination against U.S. firms is exactly what the proposed legislation would entail. Because it targets only companies above a set market capitalization, annual revenue, and number of users, it would leave large Korean conglomerates, known as chaebols, untouched while subjecting U.S. companies to draconian regulatory controls on their operations and strategic development.
The proposed legislation is premised on the idea that it will bust monopolies, but this is simply false. U.S. technology companies do not exercise monopoly positions in Korea. Rather, the chaebols strongly compete with U.S. companies and account for more than 80% of Korea’s GDP. There is no question that innovative U.S. tech companies are the obvious target of such regulatory protectionism simply because they are American and are competing with favored chaebols.
Doubly concerning is the apparent exclusion of massive Chinese companies from the KFTC’s proposed regulatory scheme. They are likely to fall below the criteria for monthly average users, unlike U.S. tech companies. Restricting market access and opportunities for U.S. companies while allowing Chinese digital giants to grow their footprint in Korea would raise concerns over fair competition and even about national security. At a time when other countries are seeking to scrutinize and limit Chinese technology companies on valid national security grounds, it would be anomalous for Korea to give such companies preferential treatment relative to their U.S. competitors.
The U.S.-Korea trade and economic relationship is geopolitically significant and requires a delicate balance. It is worth recalling that Korus wasn’t broadly popular in the first place among American lawmakers, unions, and other domestic stakeholders. Negotiations for the deal concluded in 2007, but then-Speaker of the House Nancy Pelosi delayed U.S. ratification for nearly four years. Despite support from the presidential administration, many lawmakers were concerned that the agreement would negatively impact American manufacturing jobs without providing adequate market access for U.S. companies and exports. In 2011, after negotiations to amend the original agreement, Korus passed the House of Representatives, but 151 members voted against the agreement.
All of this happened when global trade enjoyed broad support in Washington. That is no longer the case. It was only after months of intense negotiations in 2017 and 2018, and only after important concessions by the Korean side, that Korus was successfully amended and its continuing viability prolonged. This new legislation would resurrect major disputes and likely cause another flare-up in trade tensions.
I would urge caution on the part of Korean officials to avoid another clash. There is no good path forward where Korean regulations treat U.S. companies more restrictively compared to domestic—and Chinese—companies operating in the digital space. U.S. relations with Asian partners are more important than ever, and this legislation is an unnecessary provocation. Consumers and workers in both countries will be better off if U.S. companies are allowed to fairly compete in the Korean market.
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