Just about everybody agrees that "non-discrimination" is a core principle of the trading system, but what exactly do we mean by it? What is the role of intent and effect? Governments who feel like their companies are being hurt by a foreign regulation often focus on the effect, while governments who are regulating prefer to talk about their intent. One way to get some clarity is through cases that adjudicate the issues, and the U.S.-South Korea conflict over digital trade regulations that I wrote about with Haeyoon Kim could be a good one if it goes to litigation:
New legislation introduced in the US Congress suggests that a major US-South Korea digital trade dispute could be unfolding, with Korea’s recently proposed regulation of online platforms in the crosshairs of US policymakers. Despite a shift by the Korea Fair Trade Commission (KFTC) from its earlier regulations, tensions remain, mainly stemming from conflicting views and misunderstandings regarding the goals of Korean regulators. While US critics highlight the negative effects on US tech companies, Korean regulators emphasize that the intent of the proposed law is neither discriminatory nor protectionist but instead aims to address challenges in the Korean digital market today.
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Despite the KFTC’s announcement of a more measured approach, pushback from major US policy voices persists. Much of the debate is framed within the US-China competition, with claims that South Korea’s new regulation could disadvantage US tech companies and benefit Chinese ones. In this regard, there have been arguments in Washington that Seoul is targeting and discriminating against US tech companies.
This view was stated during a recent congressional hearing by Representative Carol Miller (R-WV), who expressed deep concern that a key ally like South Korea is “pursuing economic policies that target and discriminate against US technology companies” while “welcoming state-owned Chinese companies with open arms.” On September 27, she introduced legislation, titled the U.S.-Republic of Korea Digital Trade Enforcement Act, to “stop the Korean government from implementing these blatantly discriminatory laws that will cause an unnecessary irritant to such a vital relationship [between the two countries].”
The bill notes that South Korea is considering “additional discriminatory digital regulations that would unduly burden United States businesses while benefiting Chinese technology companies.” To “ensure a fair and nondiscriminatory regulatory environment,” it requires the United States Trade Representative (USTR) to report to Congress if Korea enacts laws or regulations that “predesignate or post-estimate a United States online or digital platform operator and impose discriminatory business restrictions.” The report will include a determination of whether a US entity was negatively impacted, if any trade agreement violations exist, and whether the law or regulation burdens or restricts US commerce as outlined in Section 301 of the Trade Act of 1974. Following the report, USTR may take action to protect US commerce, such as initiating a WTO dispute, a Section 301 investigation, a KORUS FTA dispute, or reaching an agreement with Seoul to mitigate the impact.
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At the heart of the potential US-South Korea dispute lies a fundamental question: what is discrimination? US officials contend that South Korea’s new regulation disproportionately affects US tech firms compared to Chinese and Korean ones, which they believe constitutes discrimination. However, Korean antitrust authorities argue that the regulation is designed neutrally and lacks any discriminatory intent, thus not meeting the criteria for discrimination. Ultimately, in their view, the regulation is essential to ensure a fair and anti-monopolistic digital environment, without fear or favor over company nationality.
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... the KFTC Chairman responded to Representative Miller’s bill [by saying] that the Korean competition law “has historically been enforced without favoring domestic operators.” He added that the upcoming amendments “will also be applied without discrimination between domestic and foreign businesses,” reflecting Seoul’s desire to provide a balanced treatment of large platforms, regardless of nationality.