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 signaled the prospect of deepening security cooperation between South Korea and Europe, which has continued with the recent acceptance of South Korea’s mission to NATO. While South Korea’s security cooperation with Europe brings two key security partners of the United States closer, all three will benefit from expanded trilateral economic cooperation.

The desire to deepen cooperation between NATO and South Korea is driven by the need to cooperate with partners in the region to address “cross-regional challenges and shared security interests,” as NATO puts it. However, the same challenges – such as Russia’s invasion of Ukraine or China’s rising assertiveness – that create the need for regional security cooperation are also creating the need for cross-regional cooperation on issues related to energy and technology. Meanwhile, digitalization and scientific breakthroughs in biotechnology and nanotechnology and broader economic trends such as climate change require similar cross-regional cooperation.

These issues are not neatly bounded regionally, but rather require cooperation with external partners. Instead of sticking to the traditional regional focus for cooperation, Washington, Seoul and Brussels would be wise to develop mechanisms that bring together the best partners for cooperation on set issues.

Trilateral cooperation between the United States, the European Union and South Korea will tap into the already deep economic ties between the three economies and provide an opportunity for improved coordination on emerging economic issues. All three economies are among each other’s top 10 trading partners; All are technological leaders and pursuing ambitious climate goals. South Korea is the first major economy to have free trade agreements with both the United States and the European Union.

Trilateral cooperation would also address the challenge of integrating South Korea into regular discussions on economic and technical issues with Europe, despite Tokyo’s reluctance to see Seoul join the G-7.

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While there is potential for deeper cooperation, any attempt to build trilateral cooperation should be limited to its early stages and focus on the challenges and opportunities related to technology, energy and climate change to avoid straining the relationship.

Technical cooperation

The era of globalization where technology flowed largely unhindered to other countries is over. While the pandemic shortage has highlighted the need for the United States and the EU to increase domestic semiconductor manufacturing capabilities, competition with China is driving further change in how critical technologies such as semiconductors are viewed.

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Starting with the Trump administration, the United States has sought to limit the flow of advanced technologies to China. The Biden administration continued this effort by tightening export restrictions on the sale of semiconductors and related equipment to China, and is weighing export restrictions on biotechnology and algorithms that underlie artificial intelligence. The EU is also moving towards the view that it needs to maintain a technological edge over China.

With 75 percent of the world’s semiconductors produced in Asia, the United States has looked to deepen ties with partners in the region through the Chips 4 initiative and particularly reaching out to South Korea. However, any semiconductor initiative that does not include the EU, a critical partner for semiconductor equipment, would be suboptimal at best. Trilateral cooperation between the United States, South Korea and the EU brings together three critical players in the industry and fills the gap in Chips 4.

While semiconductors will be the focus of any initial trilateral cooperation, with three of the world’s leading tech economies, enhanced consultations will help smooth out differences in technology and digital business approaches. The United States and the EU generally take different positions on data privacy, but South Korea is at the forefront of developing Metaverse and pushing for new standards for in-app payments. The US, EU and South Korea don’t always agree on these issues — Washington and Seoul have different views on in-app payments, for example — 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 initially designed to show that democratic and market-based approaches to business, technology and innovation still work in a world of growing state-led capitalism. Including South Korea could increase that process.

Energy and climate change cooperation

Russia’s invasion of Ukraine and the weaponization of energy exports have heightened the need for cooperation on energy security. Before the Russian invasion the European Union depended on Russia for a third of its petroleum 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 more dependent on the Middle East — another region prone to conflict.

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In the immediate aftermath of the crisis, the United States increased its energy exports and helped the EU secure other energy sources – including South Korea agreeing to allow some of its LNG to be diverted to Europe.

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Climate change is where these immediate concerns and their national security implications begin to converge, along with the potential for cooperation on technology and energy. The United States, South Korea and the European Union each have their own ambitious climate change initiatives. The United States aims to reduce emissions by 50-52 percent from 2005 levels by 2030, South Korea by 40 percent from 2018 levels, and the EU by 55 percent from 1990 levels. Achieving these goals will require transitioning to electric vehicles, greening high carbon-intensive processes such as steel production and developing new energy sources, as well as considering carbon border adjustments for trade. All these are potential areas of cooperation.

An example of this convergence is the transition to electric vehicles (EVs). South Korea will play a key role in the transition, particularly in the area of ​​EV batteries. South Korean firms have announced $13 billion in EV battery manufacturing facilities in the United States that will serve the needs of domestic and foreign manufacturers. South Korean firms are expanding their production in the EU to meet European demand.

The US Inflation Reduction Act (IRA), however, requires the United States or US FTA partners to increase the level of minerals used in the production of EV batteries to qualify for half of the EV subsidy provided under the IRA. It has also strained relations with South Korea and the European Union, which is designed to encourage the movement of supply chains for high-tech products and minerals to the United States or friendly partners and away from China for national security. dominated the mining and processing of these minerals.

While increased trilateral cooperation would not only facilitate resolving disputes over the IRA with two major US partners, it would also allow better coordination in setting new standards to reduce emissions from steel, where the US and the EU are already cooperating and South Korea’s major steel producer has committed. To achieve carbon neutrality by 2050. Cooperation could extend to discussions on designing carbon border adjustment measures and commercializing new fuels such as hydrogen, which has the potential to 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 more secure energy supply chains and advance technologies in energy and energy-related sectors.

Despite the potential, barriers to deeper tripartite cooperation remain. The United States and the European Union, as the world’s two largest economies, are reluctant to bring in new partners like South Korea and instead work together to create standards for new technologies or rules for carbon border adjustments. It is incompetence at best and self-defeating at worst, as demonstrated by the EU and South Korea’s frustration over the Inflation Reduction Act.

Despite concerns about China’s lead in 5G patents, South Korean firms ranked second in total patents. With the addition of the US and the EU, 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 an important partner for discussions in the areas of tech standards.

South Korea will face its own obstacles to trilateral cooperation. The Yoon administration has promoted the idea of ​​South Korea becoming a major global power, having previously been reluctant to take certain steps amid concerns about China’s reaction. South Korea has taken some tentative steps with Chips 4, for example, despite Chinese criticism, but more significant alignment with the United States and the European Union may prove difficult.

Despite these challenges, there are benefits from trilateral economic cooperation. However, the test for any new collaboration platform 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 is losing importance due to Sino-US competition, to say nothing of Russia’s role, there is no solid platform connecting the United States, the European Union and South Korea – three of the world’s largest economies and critical tech partners. There are issues, such as climate change, which require working more broadly with other partners, but increasing trilateral cooperation on technology, energy and climate change can help fill important cooperation gaps, improve coordination on emerging issues, and deliver economic benefits.

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