The Peninsula

South Korean Company’s Strategic Investment

Published May 21, 2019
Author: Yong Kwon
Category: Current Events

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here

What Happened

  • Lotte Chemical invested $3.1 billion to establish a shale gas-based ethylene production complex in Louisiana.
  • Lotte believes that the ability to leverage the extensive shale gas production in Louisiana will lower production cost by 30 percent.
  • President Trump praised the investment, specifically highlighting his expectations of local job creation.
  • President Trump met with Lotte Group Chairman Shin Dong-bin in the White House.

Implications: Lotte’s investment may help moderate the Trump administration’s future scrutiny of the bilateral trade relationship. President Trump recently declared that “the golden era of American energy is underway,” calling for the expansion of both production and export of hydrocarbon resources. Lotte Group’s investment to produce ethylene from U.S. shale gas aligns with this aim. Further deepening Lotte’s role as a validator for the Trump administration, the White house explicitly used Lotte’s investment in Louisiana as evidence of the country’s broader economic health. President Trump was particularly excited about the approximately 2500 jobs that the complex will produce in the Lake Charles area of Louisiana. Advocates of the U.S.-ROK trade relationship hope that the administration’s spotlight on Lotte’s investment will translate to reduced frictions on persistent issues such as South Korea’s auto exports to the United States.

Context: Following the resolution of the steel tariff dispute and the renegotiation of the Korea-U.S. Free Trade Agreement, the U.S. Section 232 Investigation into the effects of auto imports on national security remained the biggest unresolved area of contention between the two countries. The White House recently noted that “the renegotiated United States-Korea Agreement… could help to address the threatened impairment of national security found by the Secretary [of Commerce].” Nonetheless, U.S. pressure on Korean auto manufacturers is not yet completely over. The U.S. government declared its intention to pursue negotiations with Japan, the European Union, and “any other country the Trade Representative deems appropriate” to address imported automobiles and auto parts. As such, U.S.-Korea trade in this sector will also be monitored for 180 days to see if there are any changes. The annual U.S. import of Korean motor vehicles and parts have been steadily falling since 2015.

Korea View is edited by Yong Kwon with the help of Haram Chung, Yea Ji Nam, Steven Lim, and Haeju Lee.

Picture from U.S. Energy Information Administration, U.S. Department of Energy

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