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(EDITORIAL from Korea Times on Sept. 20)

Editorials from Korean dailies 07:02 September 20, 2022

Another unilateral move
U.S. seeks to block M&As in high-tech fields

In yet another much-criticized "America-first" policy, U.S. President Joe Biden signed an executive order Thursday to prevent some foreign entities from investing in crucial U.S. organizations. It can disallow mergers and acquisitions (M&As) to protect U.S. supply chains in the name of national security. The order refers to investors from "a country of special concern that has a demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect United States leadership in areas related to national security."

The order clearly targets China, although it stopped short of mentioning the nation. What matters is that the U.S. move will likely prevent even major U.S. allies such as South Korea as well as its rival China from catching up with the U.S. in high-tech fields. The new order comes after Biden signed similar orders and acts, such as the Inflation Reduction Act (IRA) that excludes electric vehicles assembled outside of North America from tax subsidies.

While violating World Trade Organization (WTO) rules, the IRA also infringes on the Korea-U.S. Free Trade Agreement (KORUS FTA) which calls for equal treatment for each other's products. The U.S. has also introduced an act to favor domestically manufactured bio, pharmaceutical and other medical products.

The new executive order is also expected to deal setbacks to Korean companies investing in or doing business with Chinese firms in their possible M&As to strengthen their tech prowess and competitiveness. For starters, Samsung Electronics and SK hynix are currently manufacturing a combined 40 percent of their NAND flash memory chips and 50 percent of their DRAM chips in China.

In a speech at the 2022 North American International Auto Show in Detroit, Wednesday, Biden said the U.S. would produce semiconductors it invented within the U.S. He also said the U.S. would no longer depend on foreign companies for the production of cellphones, washing machines and cars.

Biden's America-centric policies have long been anticipated especially ahead of the November midterm elections. It is not certain whether the U.S. will soften its stance following the elections. Belated, however, we need to double down on coming up with a well-conceived trade strategy. If necessary, we need to join forces with other countries that share the values of free and fair trade.

President Yoon Suk-yeol, in particular, should make maximum efforts to bear substantive results through his planned summits with Biden and Japanese Prime Minister Fumio Kishida. He arrived in the U.K. Sunday to attend the state funeral for Queen Elizabeth II. He will also attend and deliver a speech at the U.N. General Assembly in New York, Tuesday.

Yoon should persuade Biden that the issues of subsidy discrimination and M&A restrictions will adversely affect the alliance between South Korea and the U.S. He also needs to publicize that the U.S.' unilateral moves run counter to the KORUS FTA. When a Korea-Japan summit is held on the sidelines of the U.N. meeting, Yoon and Kishida should try to find a solution to the protracted dispute over Japan's wartime forced labor, thus paving the way for a thaw in soured bilateral ties.

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