As Korea signs a free trade agreement (FTA·Free Trade Agreement) with Malaysia, attention is on whether the steel industry, struggling with protectionism in the United States and the European Union (EU), can achieve export diversification. The business community expects automobiles, steel, and chemicals, the main export items, to benefit from the FTA.

The Ministry of Trade, Industry and Energy on the 26th (local time) in Kuala Lumpur concluded negotiations on the Korea-Malaysia FTA and signed a joint declaration. As a result, nine items including cold-rolled and coated steel sheets, which had been subject to a 5% tariff, will have their item tariffs eliminated, and tariffs on 12 items including hot-rolled steel will be reduced to 10% from 15%.

Yeo Han-koo (right), Head of Trade Negotiations at the Ministry of Trade, Industry and Energy, signs the joint declaration concluding the Korea-Malaysia FTA with Tengku Zafrul, Minister of Investment, Trade and Industry of Malaysia, at the Kuala Lumpur Convention Centre (KLCC) in Kuala Lumpur on the 26th (local time). /Courtesy of Ministry of Trade, Industry and Energy

The steel industry expects exports to increase if the tariff disappears. Before the FTA with the EU (2001–2010), steel exports to the EU were $1.37 billion (about 1.96 trillion won), and after the agreement (2011–2019) they increased to $3.22 billion (about 4.6213 trillion won). According to the Korea International Trade Association, from 2020 to 2024 the growth rate of exports to FTA partner countries (5.1%) was higher than to non-FTA countries (3.7%).

If exports are activated by signing an FTA with Malaysia, the concentration on specific countries could ease. According to the Korea Iron & Steel Association, five countries—Japan, India, the United States, Mexico, and China—accounted for 48.9% of Korea's steel exports by volume last year. Kim Tae-hwang, a professor in the Department of International Trade at Myongji University, said, "Malaysia has undergone industrialization and has well-developed manufacturing. Demand for Korean steel will naturally increase."

Malaysia's crude steel production last year was 8.8 million tons (t), ranking 21st in the world, and it is Korea's 13th-largest export destination (617,000 t). Steel imports were 38,000 t, ranking ninth among import sources.

In 2017, Ju Hyung-hwan (left), then Minister of the Ministry of Trade, Industry and Energy, shakes hands after signing the joint declaration to launch negotiations on a Korea–Mercosur trade agreement with Susana Malcorra, Minister of the Ministry of Foreign Affairs of Argentina, during his visit to Argentina. /Courtesy of Chosun DB

There is also a view that FTAs should be actively used to respond to the protectionist trend in advanced economies such as the United States and Europe. Since 2018, Korea has held seven rounds of official negotiations with the Southern Common Market (MERCOSUR) to pursue an FTA. Mexico and Brazil are the fourth (2.315 million t) and 20th (259,000 t) largest importers of steel from Korea, respectively. Their global steel consumption ranks are eighth (27.6 million t) and 10th (26 million t), respectively.

Professor Kim said, "Expanding the market through agreements with Mexico and MERCOSUR could be a good approach," adding, "If the tariff is eliminated, exports can increase, giving the steel industry some breathing room."

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