As the K-steel act (special act for strengthening the competitiveness of the steel industry and transitioning to carbon neutrality) to bolster the steel industry's competitiveness passed the National Assembly, it has been found that key issues were omitted or changed during the process of integrating multiple lawmakers' bills.
The Ministry of Trade and Industry (MOTI), the Ministry of Economy and Finance, and the Ministry of the Interior and Safety opposed government support plans for electricity rates and tax deduction, citing reasons such as the "possibility of a World Trade Organization (WTO) complaint" and "equity with other industries." The steel industry says the government may have taken a somewhat passive stance in a crisis that could determine the industry's survival.
According to the National Assembly minutes on the 28th, at an ad hoc meeting of the Trade. Industry Energy. SMEs. and Startups Committee's Subcommittee on Intellectual Property held on the 19th, discussions were held to integrate into a single bill the steel industry support bills proposed by four committee lawmakers.
At the meeting, it was decided to effectively exclude government support plans related to electricity rates not only from the K-steel act but also from the petrochemical support act (special act to strengthen the competitiveness of the petrochemical industry and provide support). Lawmakers on the committee had initially included in the bills provisions to subsidize electricity rates only for the steel and petrochemical industries and to have the Steel Industry Competitiveness Enhancement Special Committee (steel special committee) review power supply and demand plans going forward.
Vice Minister Moon Shin-hak of the Ministry of Trade and Industry (MOTI), who attended the meeting, said, "In the case of direct electricity rate reductions or support, we inevitably had to delete this clause due to concerns about the possibility of a complaint under WTO rules and the need to consider equity with other laws or industries."
The Ministry of Economy and Finance (MOEF) also submitted an opposing view on the grounds that "if electricity rates are set differently through subsidies by industry sector, there is a risk of distorting price functions."
The steel industry urgently needs an electricity rate support plan. In the steel industry, electricity accounts for about 10% of the cost of steel products, while industrial electricity rates have risen by about 70% over the past three years.
If electricity charges rise by 1 won per 1 kWh, the steel industry's annual cost burden is estimated to increase by 10 billion–20 billion won. Hyundai Steel, which consumes the second-most electricity in Korea after Samsung Electronics, is reviewing joining a direct power purchase agreement (PPA) with power generators for this reason.
Kim Won-i, a lawmaker on the committee (Democratic Party of Korea), said in a phone call with ChosunBiz, "The ministries were mindful that direct subsidies would be subject to a WTO complaint, and after discussion we accepted this point and removed it from the final plan," adding, "Had the government decided to provide support, it would have been more helpful in strengthening industrial competitiveness, so it is regrettable."
Although many lawmakers proposed a tax deduction plan to support the steel industry, it was dropped from the final version due to opposition from the Ministry of Economy and Finance (MOEF). The lawmakers' bill included granting tax deduction benefits only to companies that achieved certain levels in carbon neutrality and facility improvements.
Park Hee-seok, the chief expert member of the committee, said at the meeting, "The Ministry of Economy and Finance (MOEF) and the Ministry of the Interior and Safety each submitted opposing opinions on whether to reduce taxes for businesses that reduce greenhouse gas emissions or achieve reduction targets, citing the purposes and grounds of the Act on Restriction on Special Cases Concerning Taxation and the Act on Restriction on Special Cases Concerning Local Taxation." He said that, under the overarching principles of those laws, there is a limitation in specifying detailed matters in individual laws.
At the time, committee lawmakers also voiced complaints such as, "Can we save the steel industry if the Ministry of Economy and Finance (MOEF) opposes like this?" and "If the Ministry of Economy and Finance (MOEF) opposes, it cannot be done."
As "carbon neutrality" carried more weight during the K-steel act integration process, the discussion that the country must respond to "the U.S. 50% tariff" lost some momentum. Korea's steel industry expects an additional annual burden of about 870 billion won due to the U.S. tariff hike and the European Union (EU)'s introduction of a tariff-rate quota (TRQ) on steel.
At the meeting, Kwon Hyang-yeop of the Democratic Party of Korea said, "I express regret that, considering differences among ministries and trade relations, the bill was passed with the core content left out," adding, "Even while taking tariff negotiations into account, many parts, including special accounts for the steel industry, were not sufficiently discussed throughout the subcommittee's deliberations. I hope a supplementary bill will come out going forward." The steel industry special accounts refer to special accounts that would ensure a stable budget for policy implementation when the K-steel act takes effect.
In the final K-steel act, the steel special committee, which will lead future measures to strengthen the steel industry's competitiveness, was designated as an organization under the prime minister. The initial lawmakers' bills had proposed placing it under the president, the prime minister, or the Minister of the Ministry of Trade and Industry (MOTI). However, since the bill jointly proposed by 106 bipartisan lawmakers by Eo Ki-gu and Lee Sang-hwi mentioned "under the president," the industry had expected the establishment of a "special committee under the president."
Kwon Hyang-yeop said, "The intent was to have the president take an active interest in the steel industry, but considering schedules and administrative convenience, it was concluded that placing it under the prime minister was appropriate," adding, "Since coordination among ministries is necessary, we judged it would be difficult to place it under the Minister of the Ministry of Trade and Industry (MOTI)."
The steel special committee is expected to be established early next year, centered on the Ministry of Trade and Industry (MOTI) and the Korea Iron & Steel Association. The Chairperson will be the prime minister, and the secretary Commissioner will be the Minister of the Ministry of Trade and Industry (MOTI). The committee will have about 20 members, consisting of officials from relevant ministries and civilian members. The special committee will present a practical roadmap, including a five-year master plan and annual implementation plans to strengthen the steel industry's competitiveness.
Meanwhile, the K-steel act integrates four bills: the bill (special act for strengthening the competitiveness of the steel industry and transitioning to green steel technology) led by Eo Ki-gu of the Democratic Party of Korea and lawmaker Lee Sang-hwi; the bill led by Kwon Hyang-yeop of the Democratic Party of Korea (special act to promote the steel industry and accelerate decarbonization); the bill led by Kim Jung-jae of the People Power Party (special act to strengthen the competitiveness of the steel industry and support the transition to carbon neutrality); and the bill led by Kim Won-i of the Democratic Party of Korea (special act for strengthening the competitiveness of the steel industry and transitioning to carbon neutrality).