[Editorial] Beef up economic diplomacy

US President Joe Biden on Monday signed an executive order to launch the National Biotechnology and Biomanufacturing Initiative.

It lays out a strategy to reduce reliance on China in the biomedical field while bolstering the US biomanufacturing industry.

It is likely the executive order will weaken the competitiveness of Korean biomedical companies that are strong in contract production. They are feared to suffer damage as in the case of the Inflation Reduction Act.

The act calls for suspension of subsidies to electric vehicles assembled outside North America. Korean automakers were excluded from the list of EVs eligible for the $7,500 EV tax credit. Korean government officials and businesspeople belatedly rushed to Washington to appeal for inclusion in the list, but revision of the act seems difficult.

The CHIPS and Science Act, a bipartisan law to encourage the construction of semiconductor chip manufacturing facilities in the US, puts South Korean companies in an awkward position. Its strong guardrail provision limits investment in China, and South Korean chipmakers run factories in China.

The Biden administration reportedly persuaded a Taiwanese semiconductor company to reconsider building a factory in South Korea and make an investment in the US instead.

GlobalWafers, the world’s third-largest silicon wafer manufacturer, announced in June that it would build a semiconductor wafer factory in Sherman, Texas, at the cost of $5 billion. The company is said to have considered South Korea as a site for its new factory. US Commerce Secretary Gina Raimondo at the time reportedly contacted its chief executive in June and persistently persuaded the CEO to invest in the US. Secretary Raimondo is said to have promised to reduce factory construction cost to the South Korean level, which was about a third of that in the US. Naturally, GlobalWafers leveraged into the subsidies on offer from the new CHIPS Act.

This shows how aggressive the US is in attracting foreign investment to build factories on its soil. Similar cases may happen more often as the Biden administration pursues a "Made in America" policy in realigning global supply networks around America. The GlobalWafers case makes the Korean people wonder if they have a minister so active in attracting foreign investment to build factories in Korea.

Governments of many countries strive to create a favorable business environment including tax and infrastructure incentives. Presidents and ministers lead efforts to attract foreign investment. However, Korea is required to make more efforts to draw investment from global companies.

Foreign direct investment in Korea decreased 15.6 percent year-over-year to $11.09 billion in the first half of this year, while its companies’ overseas direct investment surged 123.9 percent to $25.4 billion in the first quarter from a year earlier. Last year, investment outflow was $80.7 billion more than investment inflow.

Major economies now recognize science and technology as an important element of national security and push aggressive bills to secure high technology and protect their related industries. Sometimes alliances are put aside.

The Biden administration does not act differently from the opposition Republican Party when it comes to keeping the US' economic hegemony. If competition between the US and China becomes fiercer, Washington will likely take further measures to limit investment in and export to China. Then collateral damage will be unavoidable for South Korea, whose trade depends greatly on China.

Apart from criticism of the US’ egocentrism, the government must try harder to defend the national interest. It must monitor the biotechnology initiative and follow-up measures carefully to see if they have disadvantageous provisions for Korean firms, and it must work out measures proactively.

The government must also build up its lobbying power on US policymakers as well as its ability to collect information on what the US administration and Congress are up to.

The free trade agreement between South Korea and the US went into effect on March 15, 2012. Discrimination against products made in Korea violates the free trade deal. Based on the agreement, the government should demand the US remove discriminatory policies. It is time to focus on economic diplomacy, and a shrewd response is urgently needed.