South Korean parliament approves $350 billion US investment bill

South Korea's parliament passed a special bill on Thursday to pave the way for Seoul's $350 billion investment commitments in strategic U.S. industries under a trade deal struck last year.

The law implements a trade agreement signed in November under which South Korea agreed to invest $200 billion in U.S. strategic industries and $150 billion in shipbuilding-related cooperation in return for more favourable tariff terms.

The National Assembly passed it with bipartisan support in a plenary session on Thursday.

Due to come into force after about three months, the legislation will serve as a basis to create a state-backed investment corporation with 2 trillion won ($1.4 billion) in capital and a strategic investment fund.

The bill names shipbuilding, semiconductors, pharmaceuticals, critical minerals, energy, artificial intelligence and quantum computing as priority investment sectors, while additional sectors can be added by presidential decree.

A central provision requires U.S. investments to meet the principle of "commercial feasibility," meaning they must generate sufficient cash flow to cover principal and interest over their lifespan.

Exceptions are permitted when national security or supply chain stability are at stake, provided relevant South Korean parliamentary committees approve them.

South Korea's Industry Minister will lead a joint U.S.-South Korea committee to assess proposed projects, while a Finance Minister-led committee will decide whether to advance them to a U.S. panel headed by the Secretary of Commerce, which can also propose projects.

TARIFF AND FX UNCERTAINTIES

In late January, U.S. President Donald Trump threatened to raise tariffs on South Korean goods to 25%, saying Seoul's legislature had yet to enact the trade framework that had capped U.S. levies at 15%.

South Korean officials have said the trade deal remains valid despite a U.S. Supreme Court decision in February that struck down a large swath of Trump's tariffs.

Officials in Seoul have voiced concerns about the impact of U.S. investments on an already weak won currency and said that projects would be based on consideration of foreign exchange market conditions as well as commercial feasibility.

South Korea is included in a broader U.S. "Section 301" probe into excess industrial capacity, which the U.S. Trade Representative (USTR) has said could lead to new tariffs on major trading partners.

Industry Minister Kim Jung-kwan told a parliamentary committee on Thursday that the U.S. probe was within South Korea's expectations.

The Foreign Ministry said Washington had expressed its intention to restore tariffs struck down by the U.S. Supreme Court using the probe, adding that South Korea will consult with the U.S. to ensure the existing tariff balance is preserved and the country is not disadvantaged.

Trade envoy Yeo Han-koo told media that the U.S. appeared to be aiming to shorten its probe to four to five months, meaning that Washington could revise tariffs to the levels they were at before the U.S. Supreme Court's ruling some time after mid-July.

-Joyce Lee/Reuters