Korean companies should focus on boosting their "still-nascent" lobbying power by spending the time to understand policymakers' needs and by building a strong network regardless of the outcome of the upcoming US presidential election in November, according to legal and trade advisers from Lee & Ko, a prominent law firm in Korea.
Companies around the globe are paying keen attention to how US policy directions will diverge depending on who becomes the next US president: the incumbent Joe Biden or his predecessor Donald Trump.
"Whether it be Biden or be Trump, the president-elect will stick to its 'America First' policy and focus on stabilizing its supply chain while maintaining collaborative ties with allies," Choi Seok-young, a senior adviser at Lee & Ko, told The Korea Herald in an interview in Seoul on April 15.
Serving as a career diplomat for 37 years before joining the law firm in 2016, Choi held numerous positions, including ambassador to the South Korean Permanent Mission in Geneva and ambassador for economy and trade.
“Korea has been ramping up its lobbying efforts recently, but it is just a beginner in the decades-old sector. It is improving in terms of quantity, but it is far behind in achieving a qualitative advance in the lobbying scene."
Lee Tae-ho, who served as former vice minister of the Foreign Ministry before joining Lee & Ko in 2022, said the direction of travel for both Biden and Trump is largely similar regarding China.
"Going back, the US-China competition began with Trump's tariffs (against Chinese imports), Biden came in to keep the tariffs and added subsidies (to benefit its own industry) and expanded the battlefront from trade to industries," Lee said.
US-China competition has significantly shaped the business landscape, with Korean companies gaining a strong foothold in key industries such as chips and cars. This underscores the urgency for Korean companies to adapt their strategies to navigate through evolving market dynamics.
And it has become a mission for them to weave their way through the market safely and minimize damage from trade curbs and maximize benefit from the industrial subsidy programs -- core measures the US is taking to bring together allies and decouple with China.
The advisers said neither the CHIPS and Science Act nor the Inflation Reduction Act, which were enacted under the Biden administration, would be easy to repeal even if Trump were to be elected.
For the CHIPS Act, which aims to attract top chipmakers around the world to build advanced chip infrastructure on its soil by granting massive incentives, Trump would likely maintain the law, albeit he seek to make minor changes.
But since the IRA is largely a law supporting Biden's initiatives for climate and clean energy, the details would likely change significantly under Trump, who supports fossil fuels and nuclear energy, according to Choi.
Trump may make it more difficult for foreign automakers to receive the $7,500 tax credit for an electric vehicle, for instance.
Korean carmakers, mainly Hyundai Motor which is No. 2 in the US electric vehicle market after Tesla, would need to gear up to fulfill tougher criteria to receive the $7,500-per-car clean vehicle tax credit under the IRA.
"Trump may impose stricter regulations to exclude foreign entities of concern, in other words, China from the entire supply chain of the products it imports," Choi said.
"Trump is more towards tangible benefits and is not afraid to 'penalize' even allies if they go in a different direction than his. We have to be prepared for that."
It is also important to look at the Senate and House elections taking place at the same time as the presidential election to forecast how the country's subsidy plans would play out, the advisers said.
The law firm predicts the race for Senate seats up for grabs this year to favor Republicans, but the House of Representatives, in which Republicans currently hold a five-seat majority, is not easy to forecast. While 33 spots for the Senate are on the ballot, all 435 seats in the House are to be decided in the voting booth.
Lobbying is key
In the wake of intensifying competition between the US and China, Korean conglomerates have been seen significantly ramping up their spending in lobbying, renewing their Washington offices and increasing staff.
Samsung Electronics, with its key items being smartphones and advanced chips, spent the most in lobbying among Korean firms in 2023. According to data from OpenSecrets, Samsung Electronics and its affiliates spent $6.3 million for lobbying, of which $5.75 million was used solely for the US chip business. The number of lobbyists it hired also increased to 67 from 55 the year before.
This year, the US Commerce Department announced a $6.4 billion subsidy package for Samsung, which is building a contract-based chip manufacturing foundry in Taylor, Texas.
SK hynix, the world's second-largest memory chipmaker, spent $4.43 million for lobbying in 2023. In 2022, the company spent its top amount of $5.26 million.
SK Group also renewed its Washington office in March, renaming SK USA to SK Americas and bringing together the global affairs management of SK Innovation, SK Telecom, SK hynix, SK E&S and SK Inc., in the region.
Hyundai Motor Group, which has revamped its electric vehicle sales in the US, also spent a record $3.19 million on lobbying in 2023, with Hyundai Motor spending $2.08 million and Kia spending $1.11 million.
Park Jung-hyun, a partner attorney at Lee & Ko, also highlighted that corporate requests for US lobbying have increased in recent years.
"We are getting more questions (from companies) about who and how to approach in Washington and what networking is in the US in overall. We also connect local lobbying and law firms in Washington with Korean companies here," Park said.
In terms of quantity, Korean companies are doing much better than a decade ago, but they should also focus on quality, the advisers said.
“Whether it is the government or a conglomerate, Koreans expect lobbying efforts to achieve the desired results right away,” Choi said.
"But lobbying is a multifaceted industry and should be seen under a mid- to long-term perspective. It doesn’t make sense to hire a lobbying firm for short six months and expect to achieve the results right away."
Political action committees in the US are also an area where companies should work to boost their lobbying power, Choi said.
PACs are one of the major sources of election campaign funds for candidates in the US, with unlimited financial contributions, and are used by stakeholders to campaign for or against candidates, ballot initiatives or legislation.
"Lawmakers want to secure votes or political funds, and PAC is the main channel where they can raise meaningful amounts of funds," Choi said.
"There are some 2 million Korean Americans, but there is not a proper PAC to support the interest of Korean companies."
Lee noted that it is important to understand that lobbying power is gained not just from spending more money, but also from spending enough time understanding the needs of policymakers for mutual benefit.
"It is not just pleading to the authorities to listen to the difficulties of a company. It is persuading the policymakers with the solutions they need, which ultimately benefits the company as well," Lee said.
This article is the third installment in a series of interviews and analyses on how South Korean corporations can sharpen their diplomatic capabilities to brighten their prospects for overseas growth in this mega election year around the world. -- Ed.
