The European Union is set to significantly reduce its duty-free steel import quotas starting tomorrow, July 1. However, countries with Free Trade Agreements (FTAs) with the EU, including South Korea, have managed to avoid the worst-case scenario.

The European Commission, the EU's executive branch, held a briefing for reporters at its headquarters in Brussels on June 30 (local time) to unveil new import management measures designed to protect the regional steel industry, including country-specific duty-free quotas.

Starting next month, the EU will reduce the duty-free quota for imported steel products by approximately 47%, from the current 33.82 million tons to 18.35 million tons. Additionally, the tariff on imports exceeding these quotas will double from 25% to 50%. Consequently, nations have been engaged in intense final negotiations with the EU to secure their respective Tariff-Rate Quotas (TRQs).

Given these circumstances, attention was focused on how much of an exclusive, country-specific quota each nation would be granted, which would allow them to export without competing against other countries.

For now, South Korea and other nations with FTAs with the EU can breathe a sigh of relief as they have avoided the worst outcome.

South Korea has secured a quota of 2.073 million tons, a reduction of approximately 19.7% compared to its previous quota of 2.581 million tons.

This reduction rate is considered a relatively strong performance, especially when compared to the 47% cut in the total EU quota pie.

It is a welcome result for the domestic steel industry, which had been bracing for the worst-case scenario of having its duty-free quota nearly halved.

South Korea’s ability to limit the reduction to under 20% stands out even when compared to other FTA partners.

This outcome is attributed to the strategy of trade authorities, who emphasized that South Korea is not only an FTA partner but also a producer of high-quality steel that does not disrupt the supply chain.

In contrast, China, which does not have an FTA with the EU, saw its duty-free quota shrink significantly from 2.34 million tons to 799,000 tons.

The EU's new steel import management measures are widely seen as effectively targeting China, which has been exporting large volumes of low-priced steel products to the European market, making the scale of China's reduction particularly significant.

It was reported that Chinese Commerce Minister Wang Wentao, who visited the EU the previous day and met with Maros Sefcovic, the EU's Commissioner for Trade and Economic Security, expressed strong dissatisfaction, claiming that the EU did not consider China's requests regarding steel.

The EU announced that it has reached an agreement in principle on duty-free steel import quotas with about 13 countries, including South Korea, Turkey, India, Brazil, the United Kingdom, Switzerland, Argentina, Indonesia, Singapore, and Ukraine.

These countries account for approximately 70% of the EU's total steel trade.

The EU stated that it is continuing consultations with remaining countries that have not yet reached an agreement, such as Japan.

However, Japan is reportedly considering filing a complaint against the EU with the World Trade Organization (WTO), arguing that the new EU steel legislation violates their FTA, drawing attention to how the situation will unfold.

Through these new protectionist measures, the EU aims to raise the capacity utilization rate of its regional steel industry—currently at 67%—to 80%, with the goal of protecting 2.5 million jobs related to steel production within the region.